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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"No one yet has stepped forward or shown any interest in coming up with another bid for the company," Stevens continues. "I think Icahn is infatuated with the idea it could be taken private and the products could be marketed overseas, which is where the growth is. Clorox has a lot of potential but the company really hasn't taken advantage of those growth opportunities."

The tone of Icahn's two separate letters to Knauss and Clorox is markedly different as Icahn turns more hostile after having his credibility questioned. In the first, Icahn is cordial as he encourages Knauss to pursue synergistic buyers, arguing that Clorox could be worth $100 per share and is "simply too accretive for these potential strategic buyers to ignore."

Icahn even names some potential acquirers he has in mind, including Unilever ( UL), Colgate Palmolive ( CL), Kimberly-Clark ( KMB) and Procter & Gamble ( PG).

Icahn's response to Clorox's rejection letter, though, is a return to classic corporate-raider form. With many sentences typed in caps lock, Icahn warns Knauss of a potential "costly and debilitating proxy fight."

"You claim 'to have a proven track record of delivering superior financial returns to our stockholders,' yet the evidence suggests otherwise," Icahn writes, pointing out that Clorox shares were down 3% during the time between October 2006, when Knauss became chairman and CEO, and December 2010, when Icahn took a stake in the company.

Icahn tells Knauss that he should take the $80-per-share bid to Clorox's shareholders, but to UBS analyst Nik Modi, this could become a similar battle to the one Icahn is waging against Mentor Graphics ( MENT).

"Mentor Graphics went on the defensive with a similar 'poison pill' shareholder rights plan strategy," Modi wrote in a research note on Monday. "Today, the company has not been sold nor were there any additional offers and shares closed at $11.59 (or 32% lower than the level at which Icahn offered to buy the company)."

For investors, it seems the sweetened bid from Icahn does nothing to clear up the situation. "The prospect of someone else coming in as a bidder, like Procter & Gamble, seems to have diminished a bit," Dearborn Partners' Stevens says.

--Written by Robert Holmes in Boston.

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