Clorox Unimpressed by Icahn Offers - Analyst Blog
July 27 2011 - 1:37PM
Zacks
Clorox Corporation (CLX) once again rejected
the latest offer of a conditional acquisition from activist
investor Icahn Enterprises L.P. Icahn offered $80.00 per share for
Clorox, lifting its bid price from the initial offer of $76.50,
subject to due diligence, financing and other conditions.
After evaluating and discussing the proposal, Clorox’s financial
and legal advisers came to the conclusion that the offer still
undervalues the company.
The company moreover believes that the offer lacks convincing
value and assurance. Clorox staunchly believes that any credible
offer should have provisions for an underwritten debt commitment,
equity capital that would be sufficient enough for a transaction to
reach fruition and certain market standard provision that too would
ensure its completion.
The advisers all along reiterated that the company to its credit
continues to create shareholder value in the form of dividends and
share repurchases. From fiscal 2006 to date, the company has
distributed $2.6 billion in cash to stockholders in the form of
dividend payouts and share repurchases. The company has
consistently increased its dividends, doubling it from $1.20 to
$2.40 per diluted share over the past five years
Clorox is one of the world's leading manufacturers of consumer
products. Its strong portfolio of brands, including Clorox, Glad,
Brita, Armor All, Burt’s Bees, STP and Kingsford, offers a
competitive edge to the company and bolsters its well-established
position in the market.
Moreover, Clorox has established definite 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 the operating margin. It speaks for the company that
it has competed effectively with peers of the likes of
Colgate-Palmolive Co. (CL) and Procter
& Gamble Co. (PG).
We maintain 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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