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Consumer Stock Takeovers: Deals and Targets

Billionaire Carl Icahn stepped up his proxy fight for Clorox (CLX). On Aug. 30 he said he would backstop an auction for the cleaning supplies maker, hoping to obtain $78 per share, if the board members he nominated were elected. If the auction fails to bring in an offer at that price then he will buy the company himself at that rate, valuing the company at $10.26 billion.

Clorox had twice rejected Icahn's acquisition bids; in mid-July he offered $76.50 per share, and then raised his offer to $80 per share. Clorox then adopted a shareholder rights plan, which amounts to a "poison pill" that protects against hostile buyers through share dilution. Clorox's most recent takeover rejection came as the company questions Icahn's ability to fund the acquisition. Icahn said Tuesday he would fund half of the purchase with cash with the remainder funded through registered senior unsecured notes. He has said recently that he had a "highly confident" financing letter from Jefferies Group.

Clorox's board and shareholders would still vote on the deal, Icahn said. "The Clorox shareholders should have the right to decide for themselves whether to accept my bid or a better bid which I believe will be forthcoming from the sale process," he said Tuesday. Icahn already owns around 9.4% of Clorox.

On Aug. 19 Icahn made clear his plans to take control of all the seats on Clorox's board, intending to nominate himself, his son and nine others for election to the company's board at its next annual shareholder meeting, the date of which has yet to be set.

"When you try to seek control [of a company's board, rather than nominating a minority slate], the focus becomes what you'll do with control as opposed to the failings of the earlier management team," Charles Elson, director of the University of Delaware's Weinberg Center for Corporate Governance, told Reuters at the time.


Icahn's original proposal was widely viewed as merely a way to put Clorox in play. Entities controlled by Icahn own roughly 9.4% of Clorox's outstanding common stock, making him the company's largest shareholder. He tapped consumer products makers Procter & Gamble (PG), Unilever (UN), Kimberly-Clark (KMB) and Colgate-Palmolive (CL) as possible "strategic buyers" that might offer "superior bids." "We are in a unique position as your largest shareholder in that we are wearing two hats -- one as a shareholder and another as a buyer," Icahn wrote in his July 15 letter.

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