Troubled mall developer
( MLS) confirmed Thursday that is has hired advisers to explore a sale of all of part of the company. The real estate investment trust also announced plans for more layoffs and withdrew its 2005 earnings guidance.
Mills said it hired Goldman Sachs and JP Morgan to assist in the exploration of "strategic alternatives," which may also include a recapitalization. The move comes as shares have been bid up in recent weeks amid heightened chatter about a possible sale.
The M&A buzz has been brewing since January, when Mills announced that it would restate its financial results from 2000 to 2004. Pension funds, along with REITs like
, have been rumored to be interested parties.
Some of the latest speculation has been that any transaction will be a "club deal" in which several parties take different pieces of Mills' assets. Analysts have said, however, that a sale of the entire company also poses challenges due to Mills' numerous development projects, which are hard to value. In addition, CEO Larry Siegel is said to be averse to an outright sale of the entire company, given that it's his baby.
As well, "half of the assets are Mills' entertainment centers, and there's been no trade, so it's difficult to see what they're worth," says Jeung Hyun, a principle with Adelante Capital Management, a REIT investor that doesn't own Mills shares.
While selling some assets here and there will help Mills' balance sheet, "I don't know how patient the current shareholders are," Hyun says. "Shareholders would prefer a quick sale, and that's why the stock has gone up sharply" in recent weeks.
Mills, which is currently facing a
Securities and Exchange Commission
inquiry and numerous shareholder lawsuits, said Thursday that it is laying off an additional 77 employees, a move the company expects will save it $1.2 million in the first quarter. In January, the company laid off 19 executives.
Mills said it doesn't expect to meet the March 16 deadline to file its annual report for 2005, and said it can't provide an estimate of when it will make the filing. The REIT said its 2005 earnings and funds from operations will be "significantly below" the market's expectations and that prior guidance for the year ended should no longer be relied upon.
Mills also named Mark Ordan as its new chief operating officer. Ordan is non-executive chairman of Federal Realty Trust
, a fellow retail real estate developer.