Is Clorox Really Buyout Bait? (CLX, PG)

Clorox Corporation (NYSE: CLX) gave us a volume alert earlier today which was later summarized over for Volume Spike.  This generally slow-moving consumer products company is trading up with elevated stock volume and with more elevated options trading.  The rumor is that Proctor & Gamble (NYSE: PG) is a possible suitor, although there might be some pause over this notion.

As noted at Volume Spike, the October 2009 Calls had seen over 18,700 contracts between the $60 and $65 Calls versus a combined open interest of 6,457 contracts between the two.  If you do the same activity for November 2008 the 3,632 contracts traded in the $60 and $65 Calls versus a combined open interest of 439 contracts.    If you took the two months CALL activity on a fully leveraged basis, this effectively comes to another 2.5 million shares of trading volume on a fully leveraged basis.

There has been some 2.4 million shares and the gain is now almost 3% at $59.38.  The average daily stock volume is only 1.36 million shares.   What is interesting here is that the trading volume was under 1 million shares yesterday, and shares had been little changed over the last ten days before today’s run.  So this is fresh talk or the daily action would suggest more sudden interest.

Most antitrust issues would not be brought up over a company worth $8 billion in most cases.  But even under the Bush administrations DOJ reviews where no real mergers were blocked, the $57 billion buyout of Gillette was said to at least be getting more internal scrutiny.  That was 7-times this size today, but the notion that the Obama administration has promised to more heavily scrutinize mergers might lead us to believe that P&G and its $167 billion market cap might be enough for a company with thousands of products.

Clorox is far from being a bleach company these days.  Sure it has the Clorox brand, but it also has others such as: Liquid-Plumr, Pine-Sol, S.O.S, Tilex, Green Works, Armor All, and STP. The company;s Lifestyle unit makes food products, water-filtration, filters, and personal care products under names like Hidden Valley, Burt’s Bees, K C Masterpiece, and Brita.  Its Household unit sells charcoal, cat litter, plastic bags, and more under names like Glad, Fresh Step, Scoop Away, Kingsford, and Match Light.

Clorox has a 52-week trading range of $45.67 to $64.00.

Jon C. Ogg
September 22, 2003