2nd UPDATE: Icahn Puts Clorox In Play With $12.6 Billion Takeover Bid

NEW YORK (Dow Jones)--Clorox Co.'s (CLX) largest shareholder, Carl Icahn, offered to buy the household products maker in deal he valued at $12.6 billion, but the activist investor urged the company's board to seek a strategic buyer.

Icahn's bid, worth $76.50 a share in cash, values the stock at a 12% premium to Thursday's close. The stock set an all-time high of $72.43 when Icahn disclosed his stake in mid-February.

Icahn's offer is the latest attempt by him to spur a takeover at one of his investments, a tactic that has had mixed success. In Clorox's case, Icahn said the maker of Pine Sol cleaner, Fresh Step cat litter and its namesake bleach holds "extremely compelling synergies" for companies like Procter & Gamble Co. (PG), Colgate-Palmolive Co. (CL) and Kimberly-Clark Corp. (KMB).

Clorox said it intends to review the offer and respond in due course. The bid comes at a tough time for Clorox, as sales of its cleaning and household products are struggling in the face of consumers' continued concern over spending. The company expects sales to remain pressured as it raises prices to offset higher costs for materials such as resin and pine oil.

Shares of Clorox jumped 10.4% in premarket trade Friday to $75.55.

In a July 14 letter to Clorox Chairman and Chief Executive Donald Knauss, Icahn--who said his stake is now 9.4%--encouraged a go-shop process where the company would have the opportunity to entertain other bids. In fact, Icahn said in the letter that he anticipates "numerous superior bids," and acknowledged that he "lacks inherent synergies" in offering to buy the company.

Representatives from the companies Icahn mentioned weren't immediately available for comment. Other possible strategic buyers highlighted by Icahn were Unilever N.V. (UN), Reckitt Benckiser Group PLC (RB.LN) and Henkel AG & Co. (HEN.XE).

Icahn has tried similar moves in trying to agitate other companies. His recent efforts to buy companies like Mentor Graphics Corp. (MENT) and Dynegy Inc. (DYN) didn't pan out but did lead to strategy shake-ups or new board representation. Icahn did succeed in taking over ImClone Systems Inc. in 2006.

In the Clorox letter, Icahn said he has $7.8 billion in financing led by Jefferies and would contribute $3.8 billion in cash as well as his stake, valued at nearly $1 billion at the per-share price of $76.50.

Icahn's bid includes a $100 million payment if Clorox accepts the offer by July 29 but the deal falls through. Icahn said that "extraordinary fee" is to prevent the company from rejecting his bid on the assumption it wouldn't be able to secure financing "or that the proposal is in some other way flawed."

Back in February, Icahn had said he might seek discussions with management and that his investment was based on Clorox's "emphasis on 'mega-trends'" and its category-leading brands.

Clorox has hired Goldman Sachs & Co. and J.P. Morgan Securities LLC as financial advisers, and Wachtell, Lipton, Rosen & Katz for legal advice.

-By Melissa Korn and Mia Lamar, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

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