(CLX) Icahn Bids on Clorox

Clorox Corporation (CLX) disclosed that it has received a conditional acquisition offer from activist investor, Icahn Enterprises L.P. The acquisition, which is subject to due diligence, financing and other conditions, is worth $76.50 per share. Clorox mentioned that it will evaluate the proposal shortly after discussing with its financial and legal advisers.

Icahn, which acquired a 9.5% stake in Clorox, in February, mentioned that the acquisition price represents a premium of 12% on the closing price of the shares on Thursday while a 15.5% premium to the price which prevailed in February.

Icahn’s bid of $76.50 per share represents a value of $10.2 billion for Clorox based on roughly 133.3 million shares outstanding as of March 31, 2011. Exclusive of the 12.5 million shares, which Icahn already holds, he would give approximately $9.24 billion for the rest of Clorox’s shares and would also take $2.125 billion in long-term debt.

The Goldman Sachs Group, Inc. (GS) and JPMorgan Chase & Co. (JPM) are acting as financial advisers for the deal while Wachtell, Lipton, Rosen & Katz are the legal advisers.

Clorox is one of the world’s leading manufacturers of consumer products. The company possesses a strong portfolio of brands, including Clorox, Glad, Brita, Armor All, Burt’s Bees, STP and Kingsford, thereby offering it a competitive edge and bolstering its well-established position in the market.

Moreover, Clorox has established well-defined financial goals to measure its progress. These goals include 3% to 5% annual sales growth before acquisitions, and 75 to 100 basis points of annual improvement in operating margin.

On the flip side, the company faces intense competition from other well-established consumer product companies, both in the U.S. and in international markets, such as Colgate-Palmolive Co. (CL) and Procter & Gamble Co. (PG). Most of the company’s products compete with other widely advertised brands within each product category and “private label” brands and “generic” non-branded products of grocery chains and wholesale cooperatives in certain categories, which typically are sold at lower prices.

We are maintaining a long-term Neutral recommendation on Clorox Corporation. Moreover, the company has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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