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Icahn's Low Bid for Clorox Is Self-Serving

Share price information brought current in this update.

BOSTON ( TheStreet) -- If Carl Icahn's $12.6 billion bid to acquire Clorox (CLX - Get Report) looks a tad self-serving, it is. For a billionaire investor who owns almost 10% of the consumer products company, that's the point.

In a letter Friday to Clorox Chairman and CEO Donald Knauss, Icahn proposed a buyout of the company at $76.50 per share in cash, an 11% premium to the stock's closing price on Thursday.

But in an interesting twist, Icahn encourages Knauss to pursue synergistic buyers, noting that uninvited buyout offers in the industry are frowned upon. Icahn asserts that Clorox could be worth $100 per share for any buyer other than himself.

Clorox Bleach

"Icahn has no motivation to take it private himself," says Jay Suskind, senior vice president at investment firm Duncan Williams. "He wants to get that stock up to $100 and get out."

Icahn initiated his investment in Clorox on Dec. 21, 2010, and the stock has rewarded him with an 8.4% return, excluding dividends, through Thursday. That compares with a 5% gain on the S&P 500. At $76.50, Icahn's investment would be up 21%. If another acquirer does come in at $100 per share for Clorox, Icahn's investment would be up 58%.

Icahn states that potential buyers could see up to 26% improvement in earnings per share based on a buyout price of $100 per share for Clorox. In essence, Icahn is begging someone to buy the company, stating that Clorox "is simply too accretive for these potential strategic buyers to ignore."

"He's done a gazillion of these type of things. My guess is that he just wants to put them in play," Suskind says. "There's no way they're going to sell at whatever price he bid for them. Obviously, he's trying to force the hands of someone to go in there and take them out."

Some names already circulating as potential acquirers of Clorox are Unilever (UL), Colgate Palmolive (CL - Get Report), Kimberly-Clark (KMB - Get Report) and Procter & Gamble (PG - Get Report), which once owned Clorox before divesting the company in 1969. Of course, they're considered buyers now because Icahn himself calls them out in his letter.

Beyond putting the company in play, Icahn's letter to Clorox is interesting for two reasons: timing and tone.
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CL $70.92 -0.34%
CLX $125.23 0.37%
KMB $125.19 -0.83%
PG $80.12 0.45%
UL $44.86 -0.60%


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