DEALTALK-Clorox can wait for Icahn to fail -traders

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* Clorox stock still below Icahn's lowered offer

* Clorox not expected to restructure to thwart Icahn

* Icahn's odds seen as slim to replace entire board

By Jessica Hall

PHILADELPHIA, Sept 1 (Reuters) - Traders who bet on deals are putting low odds on billionaire investor Carl Icahn making any inroads at Clorox Co (CLX.N).

Clorox is unlikely to ever see the $10.3 billion offered by Icahn since the takeover bid is contingent on his nominees wiping clean the bleach company's board and starting an auction, merger arbitrageurs said.

Icahn lowered his takeover bid for Clorox on Tuesday, but said his offer would serve as a back-stop if an auction of the company failed. [ID:nN1E77T178]

Icahn, Clorox's largest shareholder with a 9.51 percent stake, has launched a proxy fight after the board rejected two of his earlier buyout offers.

"Wiping away the entire board won't be easy," said one arbitrageur, who declined to be named because he was not authorized to speak to the media. "This is not a board that's been asleep at the switch. It's an active board that's been producing."

In the fiscal fourth-quarter, Clorox said its profit fell less than expected and that costs in the current fiscal year will rise less than it previously thought. [ID:nN1E7711OZ]

Clorox's stock has risen about 12 percent this year, but it is trading about 13 percent below Icahn's latest $78 bid.

"The $78 number is fictitious. It's backstop offer to an auction that may never happen. The auction only happens if shareholders vote Icahn's entire slate in and the chances of that are slim," said a second arbitrageur, who declined to be named because he was not authorized to speak to the media.

A defeat at Clorox would add to recent disappointments for the corporate raider-turned-activist, who is known to take on battles at several companies at the same time. This month he has turned up the heat on Clorox after setbacks in other ventures.

Icahn revealed his new bid for Clorox on the same day he gave up on his bid for control of film studio Lions Gate Entertainment Corp (LGF.N) after a lengthy battle.

He kicked off his proxy fight at Clorox two weeks ago, the day after he lost a battle to get board seats at another target, Forest Laboratories (FRX.N).

Icahn's fortunes are far from even. He did manage to see his years-long investment in Motorola turn around this month when Google Inc (GOOG.O) agreed to buy Motorola Mobility Holdings Inc MMI.N for $12.5 billion.

Icahn and Clorox were not immediately available to comment.

Clorox earlier slammed Icahn's latest bid as an "inadequate, highly conditional proposal."

OTHER POSSIBLE BIDDERS

Icahn has said that synergies resulting from a deal with a strategic buyer could make even a $100-per-share offer viable for the likes of Procter & Gamble Co (PG.N), Unilever Plc (ULVR.L), Colgate-Palmolive Co (CL.N), Reckitt Benckiser Group (RB.L), Kimberly-Clark Corp (KMB.N), Henkel AG (HNKG_p.DE), and privately held SC Johnson.

But analysts and investors have raised questions about another bidder emerging.

"Clorox has a mix of products that a Unilever or P&G don't need to have. And no private equity firm is going to get financing to come in there and pick and choose what they want," the second arbitrageur said.

Wells Fargo Securities analyst Timothy Conder added, "We continue to believe there is little chance other strategic buyers will emerge at a price superior to Icahn's $80 offer or his $78 back stop."

Clorox, so far, has not faced a shareholder uprising to begin talks with Icahn or consider his offer.

For now, the 99-year-old company can sit back and wait for Icahn's slate of board nominees to fail, said one consumer investment banker, who is not involved with the company.

"Clorox doesn't have to launch a defensive move. They don't need to breakup the company or launch some exotic restructuring. They just sit back and wait for Icahn's slate to fail. The stock is below Icahn's offer -- no one feels that there's a real alternative out there," the arbitrageur said. (Reporting by Jessica Hall; Editing by Paritosh Bansal, Bernard Orr)