Carl Icahn’s 34% Stake in Bausch Health: A Catalyst for Change or Conflict?

Bausch Health Companies (NYSE: BHC) has become the latest battleground for activist investor Carl Icahn, who now holds a 34% economic interest in the eyecare and pharmaceutical giant. The stake, revealed in April 2025, combines direct equity ownership and complex financial instruments, sparking a clash with the company’s governance structure and reigniting debates over its strategic direction.

The Structure of Icahn’s Stake

Icahn’s exposure is split into two parts:
1. Direct Ownership: He beneficially owns 9.4% of Bausch Health’s shares, or 34.7 million common shares.
2. Equity Swaps: Through over 100 trades between 2021 and 2023, Icahn acquired cash-settled equity swaps tied to an additional 24.6% economic interest (90.7 million shares). These swaps mature in 2028 and do not grant voting or control rights.

The swaps’ non-voting nature is critical. While they expose Icahn to price movements, they prevent him from directly influencing board decisions—a safeguard Bausch Health has now fortified with a shareholder rights plan (poison pill). Adopted on April 14, 2025, the SRP prohibits any entity from acquiring 20% or more of the company’s shares without board approval, effectively blocking Icahn from converting his economic stake into voting power.

Market Impact and Analyst Sentiment

The disclosure of Icahn’s stake sent Bausch’s shares soaring 13% in premarket trading on April 22, 2025. Analysts are cautiously optimistic:
- A one-year average price target of $8.25 (a 74.79% upside from the April 2025 price of $4.72) reflects confidence in Bausch’s potential.
- GuruFocus estimates a valuation of $9.23 by mid-2026, implying a 95.55% upside, driven by historical growth and market multiples.

Strategic Crossroads: Spin-offs and Debt

The stakes in Bausch Health go beyond shareholder dynamics. The company has long sought to spin off its Bausch + Lomb subsidiary, a high-margin eyecare business, but progress has been stalled by disagreements between Icahn, chairman John Paulson, and debtholders.

In late April, Bausch priced a $4.4 billion bond offering to refinance debt, signaling financial restructuring amid escalating tensions. However, bondholders—prioritizing debt repayment—may clash with shareholders like Icahn, who advocate for riskier, higher-reward strategies.

Governance Challenges and Risks

The board’s decision to involve independent counsel Sidley Austin, LLP, highlights concerns over transparency. Sidley’s review of Icahn’s swap agreements hit a snag when Icahn refused to provide copies, raising compliance questions. Meanwhile, Paulson’s prior bond holdings ($50 million in Bausch debt, now divested) underscore conflicts of interest between equity and debt stakeholders.

Conclusion: Upside Potential vs. Execution Risks

Bausch Health’s stock offers compelling upside, with consensus targets and valuation models pointing to a near-doubling in price over the next 12–18 months. However, investors must weigh this against significant risks:
- Governance Gridlock: The poison pill and Icahn’s non-voting stake may limit his influence, but his economic exposure could amplify volatility if strategic disagreements escalate.
- Spin-off Uncertainty: Progress on Bausch + Lomb’s separation hinges on resolving shareholder and debtholder disputes, with no clear timeline.
- Debt Pressure: The $4.4 billion refinancing eases short-term liquidity concerns but doesn’t resolve long-term capital allocation debates.

For now, the 74–95% upside potential cited by analysts and GuruFocus suggests the market is pricing in a resolution to Bausch’s governance and strategic challenges. Yet, with activist pressure and legal hurdles unresolved, investors should proceed with caution—this stock is a high-risk, high-reward play on corporate restructuring success.

As Bausch Health’s May 13 annual general meeting approaches, shareholders will scrutinize the board’s ability to navigate these crosscurrents. A favorable outcome could unlock significant value; a misstep might reignite selling pressure. Stay alert.