SCHEDULE 13D/A: Paulson & Co. Amends Bausch Health Stake, Enters Restrictive Governance Agreement

Paulson & Co. Inc. has updated its beneficial ownership in Bausch Health Companies Inc. to 7.1% and entered into a new governance agreement with the company, restricting certain activist actions in exchange for board representation commitments.

Summary

• Paulson & Co. Inc. (the "Reporting Person") has filed Amendment No. 3 to its Schedule 13D regarding its beneficial ownership in Bausch Health Companies Inc.
• As of the filing date, Paulson & Co. Inc. beneficially owns 26,439,035 Common Shares of Bausch Health, representing approximately 7.1% of the outstanding shares.
• The percentage is based on 367,933,897 Common Shares outstanding as of February 14, 2025, as disclosed in Bausch Health's Form 10-K.
• A Letter Agreement was entered into on May 20, 2025, between Bausch Health and John Paulson, the principal of Paulson & Co. Inc. and an overlapping director on both Bausch Health and Bausch + Lomb Corporation boards.
• Under the agreement, John Paulson must immediately tender his resignation from both the Bausch Health and Bausch + Lomb boards if Paulson & Co. Inc. engages in "Specified Actions," which include knowingly instigating or supporting any proxy contest, soliciting proxies, seeking contested director nominations, or acquiring shares that would result in beneficial ownership exceeding 19.99%.
• In return, Bausch Health has agreed to vote its Bausch + Lomb shares for any Paulson-designated management nominee to the Bausch + Lomb Board and allow Paulson's designee to be appointed to newly-created Bausch Health Board committees, absent actual conflicts of interest, provided no "Specified Action" has occurred.
• No transactions in Bausch Health Common Shares were effected by the Reporting Person during the past sixty days.

Sentiment

Score: 7

Explanation: The agreement formalizes a cooperative relationship with a significant shareholder, potentially reducing governance uncertainty and aligning interests, which is generally positive. However, it also places restrictions on the shareholder's future activist options.

Positives

• The Letter Agreement formalizes a cooperative relationship between a significant shareholder (Paulson & Co.) and Bausch Health, potentially reducing the likelihood of disruptive activist campaigns.
• John Paulson's continued presence on both Bausch Health and Bausch + Lomb boards, coupled with commitments for future board support, suggests alignment of interests and provides Paulson & Co. with continued influence.
• Bausch Health's commitment to vote its Bausch + Lomb shares for Paulson's nominee strengthens Paulson's influence over Bausch + Lomb's governance.

Negatives

• The agreement imposes significant restrictions on Paulson & Co.'s ability to engage in activist actions, such as proxy contests or increasing its stake beyond 19.99%, which could limit its flexibility as an investor.
• The requirement for John Paulson to resign from both boards if "Specified Actions" are taken acts as a strong deterrent against future activism, potentially limiting shareholder oversight from this significant holder.

Risks

• **Shareholder Activism Limitation**: The agreement restricts Paulson & Co.'s ability to engage in certain shareholder activist activities, which could be seen as limiting a significant shareholder's ability to push for changes if they deem it necessary for value creation.
• **Potential for Conflict of Interest**: While the agreement mentions "absent actual conflicts of interest" for committee appointments, the dual role of John Paulson on both Bausch Health and Bausch + Lomb boards, coupled with the specific voting agreement, could still present perceived or actual conflicts.
• **Ownership Cap**: The 19.99% ownership cap prevents Paulson & Co. from significantly increasing its stake, potentially limiting its long-term strategic options regarding Bausch Health.

Future Outlook

The Letter Agreement outlines future governance arrangements and voting commitments, indicating a structured relationship between Paulson & Co. and Bausch Health, particularly concerning Bausch + Lomb. It suggests a path of cooperation rather than confrontation, provided Paulson adheres to the "Specified Actions" limitations.

Industry Context

This filing reflects a common dynamic in public companies where significant shareholders, especially those with a history of activism, enter into agreements with management to define their relationship and influence. Such agreements often aim to prevent disruptive proxy contests while providing the shareholder with a voice and board representation. This is particularly relevant in the pharmaceutical/healthcare sector where corporate governance and strategic direction can significantly impact long-term value.

Comparison to Industry Standards

• Shareholder agreements of this nature are common between companies and large, often activist, shareholders. They typically involve standstill provisions (restricting certain actions like proxy contests or stake increases) in exchange for board representation or other governance concessions.
• The 19.99% ownership cap is a standard threshold often used to avoid triggering certain regulatory or corporate governance provisions that apply at 20% ownership or higher.
• The commitment to vote shares in a subsidiary (Bausch + Lomb) for a specific nominee is a less common but strategic element, reflecting Bausch Health's significant ownership in B+L and Paulson's interest in B+L's performance.
• Comparable situations often involve firms like Starboard Value, Elliott Management, or Carl Icahn, who frequently engage in similar agreements to gain influence without resorting to full-blown proxy fights.

Corporate Governance

Related Party Transactions

• The Letter Agreement between Bausch Health Companies Inc. and John Paulson (principal of Paulson & Co. Inc. and an overlapping director on the BHC and B+L Boards) constitutes a related party transaction.

Stakeholder Impact

• **Shareholders**: Provides clarity on the relationship with a significant shareholder, potentially reducing uncertainty regarding future activist campaigns. The agreement's terms could be viewed as either beneficial (stability) or restrictive (limiting shareholder activism).
• **Management/Board**: Establishes clear boundaries and commitments with a major investor, potentially allowing management to focus on strategic execution without immediate threat of a proxy contest from Paulson.
• **Bausch + Lomb Corporation**: The agreement directly impacts B+L's governance by committing Bausch Health's voting support for Paulson's nominees to the B+L Board.

Next Steps

• Continued adherence to the terms of the Letter Agreement by both Bausch Health and Paulson & Co. Inc.
• Potential future appointments of Group Designees to newly-created BHC Board committees.
• Bausch Health's voting of its Bausch + Lomb shares for Paulson's management nominee at future B+L shareholder meetings, if applicable.

Key Dates

Recommendation

Keywords

Bausch Health Companies Inc., Paulson & Co. Inc., Schedule 13D, Beneficial Ownership, Shareholder Agreement, Corporate Governance, Board of Directors, Bausch + Lomb Corporation, Activist Investor, SEC Filing, Investment Management