Icahn bids on Clorox, invites others to compete

Go shop yourself

Billionaire investor Carl Icahn has offered to buy Clorox in a $10.2 billion deal, but also invited the household products maker to solicit rival bids, which he said would yield much higher offers for the company. Icahn's offer, worth $76.50 a share in cash, values the stock at a 12% premium to last Thursday's close, and is the latest attempt by him to spur a takeover at one of his investments, a tactic that has had mixed success. In a July 14 letter to Clorox Chairman and Chief Executive Donald Knauss, Icahn — who said his stake is now 9.4%, making him the largest shareholder — encouraged a go-shop process where the company would have the opportunity to entertain other bids and noted possible strategic buyers for the company might include Procter & Gamble (PG), Unilever NV (UN), Colgate- Palmolive (CL) and Kimberly-Clark (KMB), among others.

Icahn, known for pushing up the stocks in which he invests, said synergies resulting from any deal with a third-party strategic buyer could make even a $100-per-share offer possible. The bid comes at a tough time for Clorox, as sales of cleaning and household products have been weak, even amid a spate of discounting, as consumers remain frugal.

Like other companies, Clorox has worked to offset higher costs with price increases, including plans to raise the price on Glad trash bags 9.5%. In May, the company reported its fiscal third-quarter profit slipped 8.5% and it cut its view for the fiscal year. Clorox said in its own statement that it intends to review the offer and respond in due course. Carl Icahn, who said he has already arranged for $7.8 billion in financing though Jefferies & Co., offered to pay a $100-million break-up free if he is unable to close the transaction, provided Clorox agrees to the deal by July 29.

Clorox (CLX : NYSE : US$74.55), Net Change: 6.12, % Change: 8.94%, Volume: 15,871,953

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Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

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