July 13, 2024

DealBook: Icahn Bids for Clorox, but Urges It to Seek Higher Offers

Clorox bleachJustin Sullivan/Getty ImagesBottles of Clorox bleach in a San Francisco grocery store.Carl C. Icahn's net worth was estimated by Forbes at  $10.5 billion in 2010.Mark Lennihan/Associated PressCarl C. Icahn’s net worth was estimated by Forbes at  $10.5 billion in 2010.

8:03 p.m. | Updated

The billionaire investor Carl C. Icahn sought to put Clorox on the auction block on Friday, offering to buy the households goods maker in a deal that would value it at $10.2 billion, while at the same time encouraging the company to actively seek higher bids.

Mr. Icahn, who already owns 9.4 percent of Clorox, told its chief executive, Donald R. Knauss, that he was willing to buy all the remaining shares in the company at a premium price.

But, Mr. Icahn said in a letter to Mr. Knauss, “While we stand ready and able to buy Clorox, we encourage you to hold an open and friendly ‘go-shop’ sale process.” He added, “We are confident the process will result in numerous superior bids for this company.”

Citing low interest rates, corporate cash piles and Clorox’s potential to add to other companies’ earnings, Mr. Icahn went on in his letter to say, “It seems clear to us that there are potentially multiple substantially larger strategic bidders with robust balance sheets who are in a position to make a bid.” Among those he cited were Procter Gamble, Unilever, Colgate-Palmolive, Reckitt Benckiser , Kimberly-Clark, Henkel and SC Johnson.

“Now is the right time for Clorox to be aggressive in pursuing a strategic transaction,” Mr. Icahn wrote in his letter, dated Thursday, which was disclosed in a regulatory filing on Friday morning.

And although Mr. Icahn assured Mr. Knauss that he was serious about his unsolicited offer, he made the case that Clorox would be better off finding a buyer from its own industry. “We understand that we are a financial buyer that lacks inherent synergies and therefore strongly suggest that the board aggressively pursue a transaction with a strategic buyer, which should attract a higher price,” he wrote, suggesting that a possible suitor could bid as much as $100 a share.

In contrast, Mr. Icahn is offering $76.50 a share. That price does represents a 12 percent premium over Clorox’s closing price on Thursday. Mr. Icahn noted in his letter that his bid was 21 percent higher than where Clorox shares closed on Dec. 20, the day before he began building his stake in the company.

Clorox’s shares jumped $6.12, or 8.9 percent, to close at $74.55 on Friday on the New York Stock Exchange. But they did not trade above Mr. Icahn’s offer during the day, indicating that least some investors failed to share Mr. Icahn’s confidence that a superior bid would emerge.

The offer, Mr. Icahn’s filing states, is backed by a “highly confident” letter from the investment bank Jefferies Company that it would be able to arrange $7.8 billion in financing for the deal, which would come in addition to equity contributed by Mr. Icahn’s affiliates.

Clorox, which makes bleach, Kingsford charcoal and Glad bags among other brands, said that its board would review the proposal. The company has hired Goldman Sachs and J.P. Morgan Securities as its financial advisers, and Wachtell, Lipton, Rosen Katz as legal counsel.

The unsolicited offer is a strategy that Mr. Icahn has employed before; in fact, 15 times since 1997, according to the data provider FactSet Shark Repellent. Earlier this year, he bid $1.9 billion for Mentor Graphics, with the aim of flushing out a potential bidder.

But some of his efforts have not worked out. For example, Mr. Icahn bid $665 million for Dynegy last year, and as he did with Clorox, he invited the independent power company to look for an alternative offer. But after approaching “more than 50” potential suitors, Dynegy’s advisers failed to find a buyer. In February, Dynegy’s shareholders rejected Mr. Icahn’s bid.

Michael J. de la Merced contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=60607ca6af4fdf7190a256e0d6111e4f

Speak Your Mind