| NEW YORK
NEW YORK Carl Icahn's playbook might be too predictable.
The billionaire investor has made one of his biggest takeover bids in a decades-long career, offering to buy Clorox Co (CLX.N) for $10.7 billion -- and hardly anyone thinks he is serious.
Clorox flatly turned down the bid by the 75-year-old corporate raider-turned-activist as not credible and inadequate.
The shares of the 99-year-old company that makes a range of products from bleach to Burt's Bees lotions are trading some $10 below Icahn's $80 per share offer, indicating investors do not see it happening either. Clorox shares closed down 2 percent at $68.88 on Wednesday.
The bid has instead rekindled the debate about Icahn's investment style, responsibility and impact on other stakeholders -- does he keep corporate America honest or is he in it for a quick profit?
"It's a little bit like a fisherman who likes to fish by throwing dynamite in a pond," said Lynn Stout, Paul Hastings Distinguished Professor of Corporate and Securities Law at UCLA School of Law. "He'll end up with a lot of fish, but the pond doesn't do so well."
Icahn did not return calls seeking comment.
In a bid to convince Clorox he is serious, Icahn has offered to put $6.2 billion, including the roughly $860 million worth of Clorox shares he owns, in escrow.
That also includes $1 billion to bolster a highly confident -- as against committed -- letter of financing from Jefferies Group Inc JEF.N to raise $7.8 billion for the purchase.
Icahn's history as a polarizing, aggressive investor has meant that larger banks tend to stay away from backing such bids -- a handicap that leaves him open to questions about his ability to fund a deal, a banker not involved in the situation said.
Icahn's net worth was pegged at $12.5 billion by Forbes as of March. Earlier this year, Icahn said he would return some $1.75 billion belonging to outside investors, leaving about $5 billion in his Icahn Capital hedge fund.
Clorox is just one of his several active engagements, which include a proxy fight at Forest Laboratories Inc FRX.N, where he has a roughly 7 percent stake.
"What does it mean for the rest of the portfolio?" a source close to Clorox said. "If he said tomorrow: 'You know what, I want to liquidate Clorox to go into Forest,' do you think he could move a billion dollars at 71 bucks? No way."
In the last 15 years, Icahn has made at least 16 such unsolicited offers, according to FactSet SharkWatch, hardly any of which resulted in his acquiring the company.
Icahn even said there were better buyers for Clorox -- a move he uses often to draw other bidders.
Barclays analysts see a 16 percent chance of an Icahn takeover and only about an 9 percent chance of a strategic deal. UBS analysts set the odds even lower -- 2 percent chance Icahn buys and a 4 percent chance a third party does a deal.
When he does not succeed, other investors often feel the pain. A study last year by Texas A&M University and Oklahoma State University researchers found companies that remained independent for at least 18 months after Icahn's initial investment saw shareholders rack up a negative 60 percent return.
At Clorox, the cost of borrowing has gone up, although the company is not in the market for funds right now, a second source close to the company said.
Based in Oakland, California, Clorox might also have a harder time attracting talent and keeping employees while Icahn grabs headlines, the source said.
"Mostly people don't take it seriously," the source said. "(But) around the edges, people are worrying."
Q Investments partner Scott McCarty, who has been involved in disputes with Icahn over investments in Icahn-controlled XO Holdings Inc XOHO.OB and Federal Mogul Corp FDML.O, said bids such as Clorox make the job of other activists harder.
"He's putting a black mark on activist investing. His actions as a majority shareholder make everybody else more skeptical," McCarty said.
Icahn's playbook is also getting all-too-familiar for traders who look to profit from precisely such situations.
"My initial reaction is, if the stock goes up a lot, sell it," said one arbitrageur. "I shorted Clorox day one, premarket at $75.75, and bought it back later in the day at $74."
While Icahn's motives might be questioned, his smarts and his ability to make money are not.
Icahn succeeds often -- about one in three targets get acquired -- and shareholders then see returns of almost 25 percent from the time of his initial investment to the sale, according to the academic study.
Since 2004, Icahn's funds have returned 106.9 percent, he wrote on March 7. The shares of his holding company, Icahn Enterprises LP IEP.N, have risen about 25 percent this year.
"He has got a thick skin and he is tough-minded. And I think you need to have that as an activist investor, otherwise people won't take you seriously," said Damien Park, president of Hedge Fund Solutions, which advises both companies and activists.
"He's like a dog with a bone. He won't go away."
Icahn often takes the battle to shareholders after being spurned, which can turn on investors' relations with management.
He has already stepped up the intensity of his attack on Clorox, saying shares have languished since Don Knauss took over as chief executive in October 2006.
Clorox has hired investment banks JPMorgan Chase & Co (JPM.N) and Goldman Sachs Group Inc (GS.N), law firm Wachtell Lipton and public relations firm Joele Frank to advise it.
"The very notion that he's bought some shares in your company strikes fear in the hearts of directors. Not that they think they are doing anything wrong, but rather they are going to be subjected to a lot of blasts in the press," said a public company director who has dealt with Icahn in the past.
"If somebody else tried to do the same thing, they might get ignored. But you don't ignore Carl."
(Additional reporting by Jessica Hall and Soyoung Kim; editing by Andre Grenon)