How Carl Icahn could create value with this health company, which has many valuable businesses

Icahn intends to engage in discussions with the company’s management and board regarding ways to enhance shareholder value, including the company’s ongoing strategic review.

In Icahn’s 13D at Bausch, he states that he to intends to engage in discussions with the Company regarding ways to enhance shareholder value, including the company’s ongoing strategic review and possible board representation. We believe he is really concerned about strategic opportunities. First, the language about board representation is boilerplate language for Icahn 13D filings but the language about strategic review is not. Second, the board already has two 13D shareholder directors – Robert Hale of Value Act and John Paulson of Paulson & Co. More likely Icahn is interested in creating value through strategic transactions at Bausch, which was built on many acquisitions over the years when it operated as Valeant.

Since Icahn’s filing, 13D shareholder Glenview Capital released a letter to the company welcoming Icahn as an active shareholder and releasing its own plan for the company – sell off stakes in or portions of its high-value, optimally-profiled assets at fair prices to raise equity and de-lever offering ownership in iconic assets to the many pools of capital who are chasing a scarce number of fairly-valued, quality growth alternatives. As Icahn alludes to in his filing, the company has already announced that it intends to separate its eye-health business into an independent publicly traded entity from the remainder of Bausch Health Companies Inc. in late 2021 and Glenview supports selling 40% of this business to the public. Management stated that it is exploring various capitalization structures and the form of the separation transaction in order to properly capitalize both entities post-separation. As Glenview suggests, there are also opportunities to create value by selling off other business lines.

This is an area where Icahn could certainly add value. The eye care business accounted for $3.7 billion of the company’s $8.6 billion of revenue in 2019. Icahn will certainly want to make sure that shareholders get full value in the separation, which could mean a sale of the business instead of a separation. Who knows, maybe optimal value would be derived by selling the eye care business and/or other Bausch businesses to a SPAC? With the number of SPACs being launched these days, it is just a matter of time before they have to look at subsidiary businesses of public companies.

Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.