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Clorox, the listed US consumer goods company, is expected to unveil its long-term strategy on Thursday amid rumors of a possible sale.
Clorox’s incoming chief executive Don Knauss may decide to make more acquisitions in Latin America, jettison some of its disparate businesses at home, or even sell the entire company, analysts and investors have speculated.
Knauss, 56, who came from Coca Cola to California-based Clorox last summer, has now finished evaluating the company, whose products include household bleach, food bags, cat litter, salad dressings, water filters and charcoal, and will discuss the company’s goals with analysts and investors on 24 May.
Last week, speculation among traders mounted that takeover chatter was driving Clorox’s shares up. Bob Goldsborough, VP of research at Ariel Capital Management, a large Clorox shareholder, thinks Clorox can get even bigger, particularly as it is much smaller than larger consumer products rivals Procter & Gamble, and Reckitt Benckiser.
But Clorox, which has a market cap of USD 10.2bn, is still a potential target for a large international strategic player such as Japan’s Kao, which does personal care, cleaning products and specialty chemicals, said Goldsborough. Clorox’s high valuation, meanwhile, means it is an unlikely private equity buyout candidate, Goldsborough thought.
Divestments are also possible, but not likely. “Current management has made it very clear that they like all the pieces in the portfolio,” said Goldsborough. Nonetheless, Clorox management is “less wedded” to its auto care business, which includes the STP fuel additives and Armor All brands; its Combat roach killing gel; and its dressings and sauces brands Hidden Valley and KC Masterpiece, said Goldsborough. Other reports suggest Clorox could also sell its S.O.S scouring pads and Brita water filters.
Goldsborough thinks there’s a possibility that Clorox may expand further internationally, not just through expanding existing operations but also by acquisition. Clorox last December agreed to pay USD 126m for Colgate’s household bleach business in Latin America and Canada, and Goldsborough expects to see similar transactions going forward.
Goldman Sachs in a written note said it expects Clorox “to step up focus on international acquisitions, with bias towards Latin America.” International sales accounted for 13.8% of company sales in fiscal 2006 and represents 15% of sales year-to-date for the current year.
“We believe management is very focused on bolstering the company’s international presence as a way to accelerate the company’s volume growth,” analyst Amy Low Chasen wrote.
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