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How Would You Like To Vote For Carl Icahn’s Clorox Slate?

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What's in it for you? Well...if you elect his co-workers, family and friends to run Clorox, he’ll put the company up for auction and get you at least $78 a share. Or, if he can’t, he’ll just give you the $78 himself. But only half of that will be in real money. The rest will be in Clorox bonds that, a month ago, Jefferies was “highly confident” that they could sell to the market on reasonable terms. Now maybe not so much:

The activist shareholder Carl C. Icahn fired yet another salvo in his battle with Clorox on Tuesday, saying that if he succeeds in replacing the entire board, he would immediately put the consumer products company up for sale, seeking at least $78 a share.

And if the sales auction does not bring that price, Mr. Icahn said, he would agree to buy the company for $78 a share. …

He said that this latest offer of $78 a share would be half in cash and the remainder in registered senior unsecured notes, and that this bid would not be subject to financing or due diligence on the company’s finances.

Mr. Icahn said in a short interview that his latest offer was $2 lower than the $80-a-share bid in July because it was riskier, since he was waiving due diligence.

This is puzzling: in his scheme, other potential buyers would get to conduct due diligence, and with Icahn on the board he’d have the time and access to do the same. So he would get to do due diligence. And if he didn't like what he found he could probably change his mind - after all, he’s already backed away from last month’s $80 offer.

And the new structure does seem less confident. In that $80 offer, Icahn offered to escrow $5.2 billion ($4.2bn of cash plus his own ~$1bn worth of shares) to support his bid. For the rest of the $13bn enterprise value, he had a Jefferies “highly confident” letter saying that it would be no sweat to raise $7.8 billion of debt against Clorox.

The new terms put a $12.8bn enterprise value on Clorox, of which $10.3bn is for the equity ($9.3bn for the non-Icahn equity). If, as proposed, that’s half in cash and half in paper, he’ll need to come up with some $4.6bn of cash for the shareholders who are not him.

That’s a bit more than the $4.2bn equity check he offered to write a month ago. But he’s getting a lot for the extra $400 million – and not just the lower purchase price. Specifically, he’d get the ability to stuff Clorox shareholders with the bulk of the debt he plans to put on Clorox, without having to market it in maybe somewhat less frothy LBO financing markets than he was looking at a month ago.

Shareholders seem to share his lack of confidence. The stock closed today at $70.52, up almost $2 on the day but still not at levels indicating that investors are “highly confident” that there’ll be a deal.

Icahn Promises at Least $78 a Share for Clorox [DealBook]