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Icahn's Bid for Clorox Gets Personal

BOSTON (TheStreet) -- Clorox (CLX) has awakened an angry corporate raider after questioning the credibility of Carl Icahn's buyout offer. Now it's personal.

Clorox Chairman and CEO Donald Knauss in a letter Monday said the company's board of directors was unanimous in agreeing that Icahn's bid to acquire Clorox at $76.50 per share "substantially undervalues the company and is neither credible nor adequate." Clorox also adopted a shareholder rights plan, which amounts to a "poison pill" that protects against hostile buyers through share dilution.

Carl Icahn

Icahn shot back at Knauss and Clorox in a letter Wednesday, calling it "disingenuous" and saying the board's concerns are "misguided." Icahn, who originally proposed a buyout of the company at $76.50 per share in cash, is now offering $80 per share for Clorox. Icahn's original proposal was widely viewed as merely a way to put Clorox in play. If Icahn was truly only trying to ignite a bidding war, he's only bidding against himself thus far, and he doesn't seem very happy about it.

"For Don Knauss and the rest of the board to claim our proposal remains inadequate and at the same time tout your record for shareholders seems a bit absurd," Icahn wrote in Wednesday's letter. Icahn said his firm and affiliates will escrow $5.2 billion, inclusive of his ownership of 12.5 million shares of Clorox, adding that there is no legitimate concern that he could raise the remaining $7.8 billion in financing needed to complete his proposed deal.

By putting his money where his mouth is, the billionaire investor has completely surprised analysts who follow Clorox. Bank of America/Merrill Lynch research analyst Christopher Ferrera called a sweeter Icahn bid a "less likely possibility" on Monday, noting that Clorox's board is not staggered. A staggered board helps protect public companies against hostile bids.

Deutsche Bank research analyst Bill Schmitz on Monday called the likelihood of a higher bid from Icahn, "especially one high enough to satisfy Clorox's board, very remote." UBS analyst Nik Modi said he continues to believe "a competitive bid from a 'strategic buyer' is unlikely."

If Icahn was determined to stir up bidders for Clorox, then why would he return with a sweetened offer so quickly?

"It's hard to see what his objective is," says Wayne Stevens, managing director and CIO at Dearborn Partners. The Chicago-based firm has $2.3 billion in assets under management and owns shares of Clorox.

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