Billionaire investor Carl Icahn offered to buy Clorox Co., the maker of the namesake bleach, for about $10.2 billion in a move designed to draw out other potential bidders.
Mr. Icahn, the company's largest investor with a 9.4% stake, offered to pay $76.50 a share, 12% more than the Oakland, Calif.-based company's closing price yesterday, according to a filing today. Including debt, the transaction values Clorox at about $12.6 billion, Mr. Icahn said.
In a letter to CEO Donald Knauss, Mr. Icahn urged Clorox to seek offers from "strategic buyers" including Procter & Gamble Co., Kimberly-Clark Corp., Henkel AG and Colgate-Palmolive Co. These potential bidders could market Clorox's brands "more aggressively" overseas, he said. "Clorox represents a scarce asset in an industry landscape where we fail to see any comparable alternatives."
Henkel, the Dusseldorf, Germany-based maker of Soft Scrub cleaners and Dial soap, makes sense as a strategic buyer because it is looking to expand in the U.S., Linda Bolton, an analyst at Caris & Co. in New York, said in an interview today. An acquisition by Dallas-based Kimberly-Clark could also add to its lineup of hygiene and consumer products, said Bolton, who has a "neutral" rating on Clorox shares.
Mr. Icahn's offer is the biggest for a household products and wares company in the U.S. in the past five years. The bid values Clorox at about 11.2 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. The median multiple of seven deals in that period and for which the data was available was 13.7 times EBITDA (earnings before interest, taxes, depreciation and amortization).
Mr. Icahn, 75, also named Unilever, the maker of Dove Soap, and Reckitt Benckiser Group, the maker of Lysol cleaners, as potential buyers. The investor said a $100 million payment will be made to reimburse Clorox if it accepts the offer and a deal doesn't go through. He said he plans to raise $7.8 billion in debt financing for the takeover, and said Jefferies & Co. is "highly confident" in its ability to raise the financing, according to the filing.
According to a statement made today, Clorox will review the proposal. Lars Wittek, a spokesman for Henkel, and Thomas DiPiazza, a spokesman for Colgate-Palmolive, declined to comment. Jennifer Chelune, a spokeswoman for Procter & Gamble, declined to comment. Stephanie Forest, a spokeswoman for Kimberly-Clark, wasn't immediately available to comment. Unilever and Reckitt Benckiser also declined to comment.
In May, Clorox cut the top end of its annual profit forecast and predicted 2012 earnings that fell short of analysts' projections, citing higher-than-anticipated commodity costs.
"While this poor performance has lessened the prospects for Clorox shareholders on a standalone basis, our perspective is that the prospects for shareholders have never been greater in terms of a sale of the company," Mr. Icahn said.
Mr. Icahn built his reputation as a corporate raider in the 1980s, targeting companies such as Phillips Petroleum Co. and Texaco Inc. He has also sparred with management at Time Warner Inc. and Yahoo! Inc. He often spends years holding stocks as he waits for investments to pay off.
Clorox owns disparate brands including Hidden Valley salad dressing, Burt's Bees skin care and Kingsford charcoal. The company is due to report quarterly results on Aug. 3.
-- Bloomberg News --