Icahn bids for Clorox, suggests others step up

BANGALORE/CHICAGO (Reuters) - Billionaire investor Carl Icahn put Clorox Co in play on Friday, offering $10.2 billion for the bleach maker and suggesting that its rivals should consider paying much more for the company.

Icahn's offer of $76.50 per share represents a 12 percent premium to the stock's Thursday closing price and a 15.5 percent premium to its price back in February, before Icahn announced his stake in the company.

Clorox shares rose 8.8 percent to a new high of $74.50 in brisk morning trading.

In a letter to Clorox Chief Executive Donald Knauss, Icahn said he was confident the company could get "numerous superior bids" from large consumer products companies. He also said he has a "highly confident letter" from Jefferies & Co to provide financing for his proposed offer.

Icahn, known for pushing up the stocks in which he invests, said synergies resulting from any deal with a third-party strategic buyer could make even a $100-per-share offer viable to the likes of Procter & Gamble Co, Unilever, Colgate-Palmolive Co, Reckitt Benckiser Group Plc, Kimberly-Clark Corp, Henkel AG and privately-held SC Johnson.

Industry analysts were quick to shoot down such ideas, saying Clorox's product lineup, which includes Kingsford charcoal and Hidden Valley salad dressing, is not the best fit for companies that already make household and personal goods and have largely stayed away from food and Clorox's more commoditized categories such as cat litter and charcoal.

"While many if not all can (financially) fund such a deal, why would they?" asked Weeden & Co analyst Javier Escalante. "What would a company like P&G do owning tiny Hidden Valley sauces or a Colgate owning Kingsford charcoal?"

While Clorox has a fiduciary responsibility to analyze the offer and perhaps look at strategic buyers following Icahn's approach, "he doesn't make any case for strategic buyers' rationale, said BMO Capital Markets analyst Connie Maneaty. "Why would they be interested in it?"

Asked if Icahn's proposal constituted a real bid, a Clorox spokesman said, "That's really a question for Mr. Icahn. We don't know what his plans are beyond what has been published.

"Our board is going to be reviewing the proposal."

Icahn said he beneficially owns 9.4 percent of Clorox's outstanding shares, making him its largest shareholder.

"While we stand ready and able to buy Clorox, we encourage you to hold an open and friendly 'go-shop' sale process where all the synergistic buyers are offered due diligence and invited to bid," Icahn said in the letter dated July 14.

The activist investor, who said he has already arranged for $7.8 billion in financing through Jefferies & Co, offered to pay a $100 million break-up fee if he is unable to close the transaction, provided Clorox agrees to the deal by July 29.

Clorox, whose diverse lineup of products includes Clorox bleach, Brita water filters, Glad bags and Burt's Bees natural lotions, posted disappointing quarterly results in May and forecast weak earnings for the next fiscal year as it grapples with rising packaging and materials costs.

Icahn's offer represents a new high for the stock, which rose to $72.43 in February when he announced a 9.08 percent stake in the company. At that time, he described the stock as undervalued.

(Reporting by Vidya L Nathan and Nivedita Bhattacharjee in Bangalore, Jessica Wohl in Chicago; Editing by Anthony Kurian and Gopakumar Warrier and John Wallace)