Carl Icahn Cleans Up

This morning, Carl Icahn

that he was interested in acquiring Clorox

for $76.50 per share. Obviously no one believes that Icahn will eventually own the household products company, but the move is being seen as agitating the board and potentially get a larger company to purchase Clorox. As such, shares are off their highs as of the time of this writing, up ~7% after having been up around 10% at the start of trading today. Icahn is doing what he does best, agitate boards of publicly traded companies in hopes of generating higher returns for shareholders. By offering $10.2 billion for the company, it gives notice to other companies in the space that Clorox has a major shareholder who is willing to play ball in terms of getting a deal done, and it shows that he wants to increase the value of his holdings substantially. The company has not done well with overseas expansion, and Icahn believes that a strategic buyer would better get the company's many products and brands out there and be able to generate higher earnings as a result. In addition to Unilever

and Procter & Gamble

, Kimberly-Clark Corp.

, Henkel AG and Colgate-Palmolive Co.

were mentioned in Icahn's letter to the board. The company is best known for its innovative brands that are number one in their respective categories, such as Clorox Bleach, Formula 409, Liquid-Plumr, Pine-Sol, S.O.S, Tilex, Green Works, Armor All, and STP brands. It also owns Burt's Bees and Hidden Valley salad dressing. Icahn obviously sees tremendous value in the name, as does the company itself. It intends to buy back 10-11 million shares of the company by the end of the 2011 fiscal year. One name that has been thrown out there as a potential suitor for the company is Unilever

. On CNBC this morning, Jim Cramer said he thinks Unilever could pay around $100 per share for Clorox. Earlier in

Icahn disclosed a 9% stake in the company, and J.P. Morgan discussed the move, saying that Icahn was likely right for owning such a large chunk of the stock. In the research report from February, J.P. Morgan said, "Mr. Icahn's filing says that he likes Clorox's exposure to “mega-trends”, and their plan to buy back almost 10% of the company by the end of the fiscal year. We do point out that at the very least, this filing is making Clorox's buyback more expensive. Despite recent business weakness, CLX is poised for a better calendar '11. Topline should accelerate behind easier comparisons, and more new products. The buy-back should drive EPS growth into the low teens over the next 18 months." At the time, J.P. Morgan had an Overweight rating and a $70 price target, which is about 10% below where shares are trading today on news of the Icahn bid. At the

in May, Icahn said to "bet on me", as he believed the shares of his publicly traded management company, Icahn Enterprises, L.P.

were sharply undervalued. Icahn is not using IEP shares here, in fact the offer isn't really even there. It's a sign to the board that shares are way undervalued and something needs to be done. So while the "Bet on me" mantra was not exactly how Icahn said it would play out, it looks as if the Clorox bid shows that Ichan still has an ace or two up his sleeve.

Traders who believe that Clorox will eventually get acquired might want to consider the following trades:

Traders who believe that Icahn is doing nothing but being an agitator and that nothing will come of this may consider alternate positions: