Icahn's Unsolicited Offer to Acquire Clorox Company

BACKGROUND

*Damien Park, Managing Partner of Hedge Fund Solutions, speaks to Marketplace's David Gura

On July 14, 2011, Icahn made a $12.6 billion offer to take Clorox (NYSE: CLX) private at $76.50/share. The takeover values the equity of the brand name company at $10.2 billion, a 21% premium to when Icahn (now a 9.4% owner) first initiated his investment in Clorox in December 20, 2010.

In the proposed transaction, Icahn Enterprises LP will contribute $12.6 billion and Jefferies & Co. (which has issued a highly confident letter) will arrange $7.8 billion in financing. Should the Clorox board approve the offer by July 29, 2011 and the deal not close, Icahn will pay the company a fee of $100 million. The fee is being offered to prevent the takeover offer from being rejected based on concerns over whether the debt financing will come through.

No stranger to strategic activism, Icahn is encouraging Clorox to pursue a "go-shop" process where prospective synergistic buyers will have the opportunity to perform due diligence and properly value the company. According to a letter filed to the SEC, Icahn is "confident the process will result in numerous superior bids".

The letter goes onto mentioning that although Clorox has failed to meet its strategy of annual sales growth of 3% to 5% and thus lessened its valuation on a "standalone basis", the company nevertheless has tremendous synergistic accretive value to other suitors armed with strong balance sheets...

"[N]ow is the time for this Board to move. In our opinion, Clorox is simply too accretive for these potential Strategic Buyers to ignore"… ~Carl Icahn

STRATEGIC BUYERS

The above chart contains the metrics of 6 of the 7 companies that Icahn mentions as possible strategic buyers. Icahn also mentions SC Johnson as a possible strategic buyer, but since this company is private, the data has not been listed.

STOCK PERFORMANCE

5-Year Clorox Stock Performance  Source:Google Finance

 Posted by David Schatz