Mills Holder Seeks Recapitalization

An Israeli real estate company disclosed a 9% stake in Mills Corp.(MLS Quote) Wednesday and said it may invest $1.2 billion as part of a recapitalization of the troubled mall developer.

Shares of Mills surged $1.98, or 12%, to $18.99 on the news.

According to a Securities and Exchange Commission filing Wednesday, Gazit-Globe Ltd. bought 5.1 million Mills shares and has held discussions with the real estate investment trust's management about a recapitalization.

Mills is trying to sell itself, while also battling numerous shareholder lawsuits and an SEC investigation into its ongoing financial restatements. In the SEC filing, Gazit said it believes a recapitalization is a better alternative than an outright company sale.

The proposed recapitalization would entail Mills issuing Series B stock to Gazit, which would invest up to $1.2 billion at a per-share price of $24.50. The Series B stock would entitle Gazit to a majority of seat on Mills' board.

"We believe Mills can and should be rebuilt, and not sold," said Gazit Chairman Chaim Katzman in a press release attached to the SEC filing. He said his recent discussions with Mills leadership left him concerned that the company might sell itself at a distressed price.

Katzman has met with Mark Ordan, who earlier this month was named Mills' CEO. According to the filing, Ordan said Mills' board has formed a special committee to review the recapitalization proposal.

Among Gazit's other holdings is shopping center developer Equity One(EQY Quote).