This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

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.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CL $65.96 0.00%
CLX $105.94 0.00%
KMB $107.60 0.00%
PG $80.05 0.00%
UL $42.44 0.00%

Markets

DOW 17,683.58 -46.53 -0.26%
S&P 500 2,068.76 -8.02 -0.39%
NASDAQ 4,991.94 -17.2740 -0.34%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs