Mills (MLS) Holder Farallon Capital Offers to Buy $499M in Stock for $20/Share

In an amended 13D filing on Mills Corp. (NYSE: MLS), 10.9% holder Farallon Capital disclosed they submited a Term Sheet for a proposed acquisition of additional shares of the company. Under the terms, the firm proposed that, subject to the satisfaction of certain conditions, certain of the Farallon Funds or their assigns would purchase from the Company $499 million of Shares of the Company at a price of $20.00 per Share. The Farallon Investors would receive a commitment fee equal to 4% of the aggregate Subscription Amount upon execution of a subscription agreement relating to the Subscription Shares. The commitment of the Farallon Investors to purchase the Subscription Shares would terminate if the Company entered into a Competing Transaction before the Closing for theSubscription Shares.

From the Purpose Of The Transaction section of the filing:

The Reporting Persons are filing this amendment to report that, on January 15, 2007, at the request of the Company, the Reporting Persons submitted to the Company's financial advisors a Term Sheet for a proposed acquisition of additional Shares of the Company by certain of the Reporting Persons (the "TermSheet"). The Term Sheet was submitted with a cover letter which sets forth whythe Reporting Persons believe the transaction described in the Term Sheet isattractive for the Company. The Term Sheet and the accompanying cover letter are attached as Exhibit 4 to the Schedule 13D. Upon execution by the Company, theTerm Sheet would be binding but the proposed acquisition would be subject to definitive documents being entered into and to the conditions set forth in theTerm Sheet.

As set forth in the Term Sheet, the Reporting Persons have proposed that, subject to the satisfaction of certain conditions, certain of the FarallonFunds (the "Farallon Investors") or their assigns would purchase from theCompany $499 million (the "Subscription Amount") of Shares of the Company (the"Subscription Shares") at a price of $20.00 per Share (the "Per Share Price").The Farallon Investors would receive a commitment fee equal to 4% of theaggregate Subscription Amount upon execution of a subscription agreement (the"Subscription Agreement") relating to the Subscription Shares. The commitment of the Farallon Investors to purchase the Subscription Shares would terminate if the Company entered into a Competing Transaction before the Closing for theSubscription Shares.

Pursuant to the Term Sheet, the Company would be required to pay a break-up fee of $15,000,000.00 and the Farallon Investors would have the right to terminate all of their obligations under the Term Sheet and under the Subscription Agreement, if applicable, if (i) the conditions set forth in theTerm Sheet are not met within fifteen (15) days from the date that the Companysigns the Term Sheet, except to the extent such failure is due to the Farallon Investors' breach of their obligation to use good faith efforts to consummate the transactions under the Term Sheet, or (ii) the Company enters into or consummates a Competing Transaction from the date the Term Sheet is executed by the Company through and including September 30, 2007. A Competing Transaction is defined in the Term Sheet to be any (i) any issuance or sale of any preferre dstock, common stock or other equity interests in the Company other than the Subscription Shares and any Permitted Equity Offering; (ii) any issuance of anysubordinated notes or other debt of the Company, The Mills Limited Partnership("MLP") or their subsidiaries other than collateralized mortgage-backedsecurities financing and/or other permanent debt used to refinance the Company'sexisting senior term loan with Goldman Sachs Mortgage Company; (iii) any sale ortransfer of the Company or the MLP or a substantial portion of the Company's or the MLP's assets, by merger or otherwise; or (iv) any issuance of any new equity interests in the MLP; provided, that this shall not prohibit the MLP from entering into bona fide joint ventures that do not individually or in the aggregate constitute a sale or transfer of a substantial portion of the Company's assets

A Permitted Equity Offering is defined in the Term Sheet to be any issuance or sale of Shares by the Company to be engaged in only after the funding of the Subscription Amount, which can be structured either as (i) a private placement to certain investors or (ii) a rights offering offered prorata to all of the Company's shareholders, in either case in which both (a) theFarallon Investors have the right, but not the obligation, to purchase their pro rata share of the Shares issued in such equity offering, such pro rata share based upon the Farallon Investors' holdings of Shares compared to the aggregate outstanding Shares immediately prior to such Permitted Equity Offering, and (b)the aggregate amount of equity capital to be raised in such equity offering doesnot exceed, taken together with all previous Permitted Equity Offerings, if any, $250 million in the aggregate. In addition, the Farallon Investors would have the right, but not the obligation, to purchase from the Company in a privateplacement (the "Backstop Private Placement") any unsubscribed-for amount of anyPermitted Equity Offering, subject to mutually-agreeable terms, conditions and documents.

If the Company or the MLP issues any equity capital from the date theTerm Sheet is executed by the Company through September 30, 2007 (includingwithout limitation in any Permitted Equity Offering) at an effective price lessthan the Per Share Price, the Company would be required to issue that number ofadditional Shares to the Farallon Investors sufficient to provide the FarallonInvestors with full ratchet anti-dilution protection with respect to suchissuance for any Subscription Shares or pursuant to any Backstop Private Placement.

In addition, the Company would agree to use best efforts to pursue collateralized mortgage-backed securities financing and/or other permanent debt to refinance the Company's existing senior debt owed to Goldman Sachs Mortgage Company.

Pursuant to the Term Sheet, the purchase of the Subscription Shareswould be made under a mutually acceptable Subscription Agreement. In addition,the Farallon Funds and the Company would enter into a mutually acceptable registration rights agreement (the "Registration Rights Agreement") which would provide customary demand, shelf and piggyback registration rights to theFarallon Funds and their affiliates with respect to (i) any Shares held on datethe Farallon Funds purchase the Subscription Shares, (ii) the SubscriptionShares, (iii) any additional Shares acquired thereafter and (iv) any such Sharesheld by any transferees of the Farallon Funds or their affiliates.

The proposed transaction is subject to the Company signing the TermSheet, definitive agreements being entered into, and specified terms andconditions being met, including but not limited to: (i) the Company's board ofdirectors being reduced to eleven (11) members, with the composition of theremaining members to be reasonably acceptable to the Farallon Investors, (ii)the Company agreeing to nominate a 2007 board slate reasonably acceptable to theFarallon Investors which would include two directors that are acceptable to theFarallon Investors in their sole discretion, (iii) all required approvals andconsents being obtained, (iv) the absence of any material adverse change sinceJanuary 1, 2005 that has not been disclosed to the Farallon Investors, (v) thetermination of the standstill arrangements entered into with the Company, (vi) awaiver of the REIT limitations, if applicable, and (vii) receipt by the Companyof a fairness opinion with respect to the proposed transaction.

The Term Sheet will terminate if not executed by the Company on orbefore January 19, 2007.

This description of the Term Sheet and the accompanying cover letter is qualified in its entirety by the full terms and conditions thereof.

The Farallon Investors intend to acquire the Subscription Shares as provided in and subject to the terms and conditions of the Term Sheet. In addition, each Reporting Person may, at any time and from time to time (butsubject to the terms of the Confidentiality and Standstill Agreement to theextent applicable), acquire additional Shares or dispose of any or all of itsShares depending upon an ongoing evaluation of the investment in the Shares,prevailing market conditions, other investment opportunities, liquidityrequirements of the Reporting Person and/or other investment considerations. NoReporting Person has made a determination regarding a maximum or minimum numberof Shares which it may hold at any point in time.

As previously reported (but subject to the terms of the Confidentialityand Standstill Agreement to the extent applicable), the Reporting Persons have engaged in communications and intend to engage in further communications with one or more officers of the Company and/or one or more members of the board ofdirectors of the Company and may also engage in communications with one or more shareholders of the Company regarding the Company, including but not limited to its operating properties, its development projects, its joint venture structures, its capital structure, its proposed recapitalization, its proposed asset sales, the Term Sheet and the proposed transaction set forth thereinand/or other strategic alternatives, the Company's restatement process, andshareholder communications. During the course of such communications with theCompany (but subject to the terms of the Confidentiality and StandstillAgreement to the extent applicable), the Reporting Persons may advocate one or more courses of action or transactions (including but not limited to the transaction proposed in the Term Sheet), which potential transactions may include the Reporting Persons or their affiliates as participants.