Mills gets $500 million PIPE proposal; Kreido Biofuels seals $25 million private placement

By Sheri Kasprzak

New York, Jan. 16 - The Mills Corp. led a particularly active day for private placements with news that investor Gazit-Globe Ltd. proposed a $500 million stock deal to pay off a loan from Goldman Sachs & Co. and J.P. Morgan Inc.

Word of the planned recapitalization - which includes a term loan and rights offerings as well as the PIPE - sent the company's stock skyrocketing 16.83%, or $2.56, to end the session at $17.77.

Under the terms of the proposed deal, Mills would sell 10,638,297 shares at $23.50 each and 13,513,513 shares at $18.50 each to Gazit-Globe Ltd. The average price per share is $21.00, a 38% premium to the company's $15.21 closing stock price on Jan. 12.

The company also plans to conduct a $600 million rights offering, selling shares at the lesser of the average price of the PIPE or a 10% discount to the volume weighted average price for 30 days before purchase.

Proceeds from the PIPE will be used to pay down a $575 million loan from Goldman Sachs & Co. and J.P. Morgan Inc. Gazit-Globe, in a letter to The Mills Corp., said the loan is a "ticking time bomb."

"In our view, Mills must immediately address the gun to its head evidenced by the Goldman Sachs loan," said the letter in part.

"This ticking time bomb has prevented Mills from focusing on its business plan and, as acknowledged by Mills in its Jan. 9, 2007 form 8-K [with the Securities and Exchange Commission] raises the specter of bankruptcy and the loss of stockholders' investment in the company. We believe Mills has significant upside potential ... which cannot be achieved unless Mills' near-term financial situation is addressed."

Mills Corp., based in Chevy Chase, Md., owns and operates entertainment and retail properties.

Mergers may fuel deals

In the broader market Tuesday, a sellside market source said mergers and acquisitions season may help the PIPE market.

"A lot of what you're going to be seeing now and in the coming weeks is probably going to be connected in some way to [mergers and acquisitions] activity," he said.

Already, that activity is evident. Kredio Biofuels, Inc. announced a $25 million deal as part of its merger with Gemwood Productions, Inc. and Synova Healthcare Group, Inc. closed a $15 million offering as part of its acquisition of Allendale Pharmaceuticals, Inc.

Kreido gets $25 million

Under the terms of the Kreido offering, the company sold 18,518,519 units at $1.35 each to a group of institutional investors led by Wellington Asset Management. The unit price is a 51% discount to the company's $2.75 closing stock price from Jan. 12.

Kreido's stock took a major dive on Tuesday after the deal was announced, giving up 49%, or $1.35, to settle at $1.40 (OTCBB: KRBF). The tumble started early with the stock losing 23.64%, or 65 cents, by 9:30 a.m. ET.

The units consist of one share and one warrant. Each warrant is exercisable at $1.85 for five years.

Sanders Morris Harris, Inc. was the placement agent for the deal.

Also connected to the merger, holders of $370,004 in unsecured promissory notes agreed to convert their notes into units of one share and one warrant at $1.35 each. The zero-coupon notes had been due Jan. 10, 2007.

Under the terms of the merger, the holders of Kreido's stock surrendered their shares and received shares of Kreido Biofuels.

"Substantial investments in our private placement from several premier institutional investors, plus the continued strong support of our existing investors, have given us access to both capital and strategic introductions that will position the company for rapid growth and accelerated time to market," said Joel Balbien, the company's chief executive officer, in a statement released Tuesday morning.

"Further, the public listing of our securities will help us gain mindshare as a leader in alternative fuels and process intensification technology, and facilitates our international licensing efforts."

Headquartered in Camarillo, Calif., Kreido develops and manages biodiesel plants.

Synova pockets $15 million

In the healthcare sector, Synova Healthcare Group sealed its private placement of $15 million in 6.5% senior convertible promissory notes as part of its acquisition of Allendale.

The notes, due Jan. 12, 2012, are convertible into common shares at $1.00 each.

The notes were purchased by a group of institutional and other investors, including existing shareholders and members of management.

The investors received warrants for up to 110% of the shares issuable upon conversion. The warrants are exercisable at $1.00 each for five years.

Proceeds will be used for the expansion of the company's portfolio of women's healthcare products. The company also plans to use some proceeds to pay obligations owed by Allendale.

Synova's stock gained 18.48% on Tuesday to settle at $1.25 (OTCBB: SNVH). The stock had gained 30.81% by 10 a.m. ET after the deal was announced Tuesday morning.

Based in Media, Pa., Synova develops medical diagnostic tests and over-the-counter healthcare products to treat or diagnose women's healthcare conditions.

FermaVir's deal

Elsewhere in the healthcare sector, FermaVir Pharmaceuticals, Inc. closed a $1.27 million private placement of 1,693,333 shares.

The shares were sold at $0.75 each, a 48% discount to the company's $1.45 closing stock price on Jan. 12.

The investors received warrants for 3,386,666 shares, exercisable at $1.00 each for 10 years.

"The proceeds from this financing will allow FermaVir to fund the remaining pre-clinical work to complete and file and Investigation New Drug Application with the U.S. [Food and Drug Administration] on its FV-100 for shingles," said Geoffrey Henson, the company's CEO, in a news release.

The company's stock gained 5 cents Tuesday to settle at $1.50 (OTCBB: FMVR).

New York-based FermaVir develops antiviral drugs, including FV-100 for shingles.

Strateco leads uranium deals

Moving north of the border, Strateco Resources Inc. led a slate of uranium offerings Tuesday.

"The price of uranium is about to soar," said one sellside market source based in Vancouver, B.C. "The market for uranium is massive right now, so it's no surprise we're seeing more [PIPE offerings]."

In the Strateco deal, the company plans to sell 7.7 million units of one share and one half-share warrant at C$2.60 each.

The whole warrants are exercisable at C$3.50 each for two years.

A syndicate of underwriters led by Orion Securities Inc. has a greenshoe for up to 1.92 million units.

The deal is set to close Jan. 31.

Strateco's stock gave up 13 cents to end at C$2.65 Tuesday (TSX Venture: RSC).

Proceeds will be used for exploration on the company's Matoush and Mount-Laurier uranium projects in Quebec. The remainder will be used for working capital.

Montreal-based Strateco is a uranium exploration company.

In other uranium-related news, KPS Ventures Ltd. plans to sell 30 million subscription receipts for proceeds of C$15 million.

Those receipts are exchangeable for units of one share and one half-share warrant once the company settles its acquisition of Lerida Bay Ltd.

The warrants associated with the units are exercisable at C$0.75 each for two years.

Sprott Securities Inc. and GMP Securities LP are the placement agents for the deal.

Proceeds will be used for exploration and development on the company's uranium properties and for general corporate purposes.

Once its acquisition of Lerida Bay is completed, KPS will change its name to Energentia Inc.

KPS's stock climbed by 10%, or 6 cents, to close the session at C$0.66 (TSX Venture: KPS).

Headquartered in Vancouver, B.C., KPS Ventures is a mineral exploration company.

Uranium Star raises $8 million

Also, Uranium Star Corp. concluded a deal for $8,072,500 Tuesday.

The company sold 13.43 million non flow-through units at $0.50 each and 2.715 million flow-through units at $0.50 each.

The common units include one share and one warrant. The warrants are exercisable at $0.75 each for two years.

The flow-through units consist of one share and one half-share warrant. The whole warrants are exercisable at $0.75 each for two years.

Proceeds will be used for exploration on the company's Sagar property in the Labrador Trough of Quebec.

The company's stock gained 12 cents, or 9.23%, to end at C$1.42 (OTCBB: URST).

Toronto-based Uranium Star is a uranium exploration company.

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