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Billionaire Icahn's Bid for Clorox

July 20, 2011 | About:
Clorox has recently rejected the $10 billion bid of billionaire Carl Icahn as the bid seemed too low for the firm.

Clorox is a 98 year-old manufacturer and marketer of consumer and institutional products. The products are varied including bleach and cleaning products, natural cleaning and laundry products, auto-care products, dressings and sauces, water-filtration systems wraps and containers, and natural personal care products. The firm sells its products primarily through mass merchandisers, grocery stores and other retail outlets.

Operating performance

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As it can be seen, the revenue has kept increasing over the years at the very steady pace. The four items of revenue, profit, operating income and net income are quite consistent over the years. Only in the year of 2005, the sudden rise in the net income was due to the gain on exchange between the company and Henkel transaction. That was once off event and cannot be categorized as continuing income.

Cash flows

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The net income over the years is in increasing trend, and the gap between operating cash flows and the free cash flows has been quite in line with each other. The drops in operating cash flows in 2006 were mainly because the settlement of income tax contingency. The average free cash flow for Clorox for the last 10 years stays at $581 millions.

Balance sheet snapshot

USD millions Mar-11
Cash and cash equivalents 153
Receivables 499
Inventories 435
Total current assets 1,204
Net property, plant and equipment 1,006
Goodwill 1,066
Intangible assets 636
Total assets 4,051
Short-term debt 343
Total current liabilities 1,232
Long-term debt 2,125
Total liabilities 4,133
Retained earnings 1,059
Treasury stock (1,616)
Accumulated other comprehensive income (307)
Total stockholders' equity (82)


Looking at the balance sheet snapshot of Clorox, we can see the negative equity with large amount of long-term debts, with huge good will and intangibles assets. However, the negative equity is due to the treasury stocks, meaning that the company has been buying back a lot of its own stocks. Over the last 10 years, the number of shares outstanding has been reducing from 239 millions to only 140 millions currently.

With $10 billion bid, Icahn has valued Clorox at 13.1 times cash flows and 29.5 P/E. Icahn has said in the interview that any consumers company would be crazy not to buy Clorox, and companies like Unilever (UN) and Procter and Gamble (PG), or Colgate, can get the great synergies and get the free cash flow for free.

The interview of billionaire Icahn on Clorox is here

About the author:

Anh Hoang
Money manager into global equities, especially with US and Vietnam markets. CFA level 3 candidate. Lecturer for Stalla - CFA course in Vietnam

Visit Anh Hoang's Website


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