M&A

Mills to Be Acquired by Brookfield

Deal comes one week after Mills disclosed a restatement; impact on shareholders' equity could be as much as $352 million.
Stephen TaubJanuary 17, 2007

The Mills Corp., currently embroiled in an accounting scandal, announced that it will be acquired by Brookfield Asset Management for $1.35 billion in cash. Including preferred stock and the assumption of debt, the deal is worth $7.5 billion.

Under the terms of the agreement, Mills will merge into a newly formed subsidiary of Brookfield, a Canadian-based property manager with more than $50 billion of assets under management.

The deal comes one week after Mills, a mall and entertainment center developer, disclosed that it will restate its financials for 2001 through 2004 and the first three quarters of 2005 to correct certain accounting errors. It added that the impact on shareholders’ equity could be as much as $352 million.

Mills stated its audit committee, advised by independent counsel and a forensic accounting firm, had identified a number of instances in which company personnel “failed to recognize the implications under GAAP of particular transactions, events, or other facts.” The company’s rapid growth and complex financial structure exacerbated the number of errors, Mills added.

Mills conceded that in a number of instances, “the company’s overall culture and ‘tone at the top’ were heavily focused on meeting external and internal financial expectations.” The company also acknowledged that certain errors reflect “a lack of competence and in some instances a failure of communication and inadequate internal controls.”

The company also warned last week that if it does not come up with about $1.1 billion by March 31, it may be required to sell assets, to recapitalize, to sell the company, or to seek bankruptcy protection.

In a statement announcing the deal with Brookfield, Mark Ordan, chief executive officer and president of The Mills, said, “With this transaction, we have completed our strategic alternatives process by joining with a world class real estate owner and operator. After a very competitive process, in which our board considered numerous alternatives for the company, we believe we have achieved an outcome that is the best possible result for all involved.”