Clorox Shares Look Pricey, No Matter Who’s Buying (Or Isn’t)
Clorox Co.CLX -1.69% jumped 7.4% on Monday, after the New York Post reported over the weekend that the consumer-products company had recently rejected a takeover approach with a 20% premium. But B Riley isn’t convinced there’s a potential buyer, and downgraded Clorox to sell, while sticking with its $77 price target.
“”The stock’s valuation is very high and fundamentals are weak,” the investment bank contends, highlighting Clorox’s operating-profit drops in three of the past five years. Shares were down 1.5% on Tuesday, at $95.75.
Before going through potential buyers, the firm wonders why anyone would be interested now in Clorox when it could have been bought for less 3 years ago. Then, Carl Icahn pushed for the sale and himself launched a takeover effort. No other bids emerged and the billionaire eventually walked away.
As for today, B Riley points out Procter & Gamble Co.PG -0.12% (PG) has gotten out of bleach and is “a net seller” of assets anyway. Meanwhile, Unilever ULVR.LN -1.04% PLC (UL) left the North American detergent market several years ago and “wants to get bigger in personal care, not household products.”
Among smaller players, Church & Dwight Co.CHD -0.36% (CHD) and Jarden Corp.JAH +0.33% (JAH) aren’t seen as likely buyers either—though not necessarily because their $8 to $9 billion market caps trail Clorox’s $13 billion. Jarden “has historically bought cheaper durable-goods companies and not the more-expensive consumables companies,” and B Riley thinks Church & Dwight “is more interested in personal care and [over-the-counter] healthcare.”
The firm also looks at potential overseas buyers of Clorox, which B Riley says would benefit from international distribution. It sees Clorox fitting strategically with German’s Henkel AGHEN3.XE -1.10% and the UK’s Reckitt Benckiser Group RB.LN -1.59% PLC, but Henkel had a 30% stake in Clorox it sold back several years ago. Reckitt, meanwhile, could run in to US antitrust concerns in household cleaners, as might be the case with closely held SC Johnson & Son Inc.