Gildan board resigns en masse as activist investor triumphs

(Bloomberg) — Gildan Activewear Inc.’s entire board of directors and CEO Vince Tyra resigned Thursday, conceding defeat after a bitter five-month battle with an activist shareholder over the future of the Canadian clothing maker.

The mass resignation marks a dramatic victory for investment firm Browning West LP, which owns about 5% of Gildan shares. He will take control of the board, install Michael Kneeland as chairman and reinstate former chief executive Glenn Chamandy to run the business under a new strategy.

Gildan’s board of directors made the decision after shareholders “made their views clear” ahead of an investor meeting scheduled for May 28. Browning West said preliminary results suggested an “overwhelming majority” of shares would vote in favor of its eight proposed directors at that meeting. .

The outgoing board halted all discussions regarding a previously announced sale process, Gildan said in a statement.

The company, one of the world’s largest makers of affordable T-shirts and owner of the American Apparel brand, has been embroiled in a toxic dispute for months over its direction and who should be in charge. Browning West launched a campaign to oust the board in December after trustees fired Chamandy and replaced him with Tyra, a former Fruit of the Loom executive and former University of Louisville athletic director.

Montreal-based Gildan, founded by Chamandy’s grandfather, has become a $6 billion company through a strategy of manufacturing in countries with cheap labor, allowing it to become a supplier of T-shirts and other low-cost clothing for retailers like Walmart. Inc. and designer and printed clothing stores.

The board had accused Chamandy of being a disengaged CEO, delaying an agreed-upon succession plan and wanting to pursue a risky acquisition strategy: He proposed acquiring two distributors for more than $3 billion, according to documents seen by Bloomberg News.

But shareholders, led by Browning but including other big investors such as Jarislowsky Fraser and Janus Henderson Group, rallied to Chamandy’s side and called for his reinstatement.

The public struggle for power already prompted Gildan to reform its board just a month ago. On May 1, five directors resigned and their replacements were appointed, including former Goldman Sachs Group Inc. executive Tim Hodgson as chairman. Two others said they would leave at the May 28 shareholder meeting.

But that was not enough. In recent days, proxy advisors Institutional Shareholder Services Inc. and Glass Lewis & Co. have backed Browning West. Unusually, so did a group of Gildan executives, who wrote a letter to shareholders suggesting they should support Browning West’s efforts so Chamandy could return.

In March, Browning West and Chamandy laid out plans to boost revenue, borrow more money and accelerate share buybacks to lift the stock price. Their strategy proposed that Gildan, which employs about 43,000 people worldwide, move more of its production to a facility in Bangladesh and outside Honduras, where energy and labor costs are higher, and concentrate in trying to grow in high-end segments of the sector. market, such as polar products and clothing with better quality fabrics.

Their stated goal is to raise the share price to $60 by the end of next year and to more than $100 in about five years. Gildan closed at $35.55 on Thursday in New York.

“Our directors are eager to begin working toward their common goal of delivering greater shareholder value, which begins with the reinstatement of Glenn Chamandy as CEO,” Browning West’s Usman Nabi and Peter Lee said in a statement.

“Glenn is a visionary leader with a track record of creating value, unparalleled knowledge of Gildan’s manufacturing business, a deep connection to the company’s employees and shareholders, and an impressive ability to foresee key industry changes to keep Gildan one step ahead of your competitors. ”

(Updates with additional background to ninth paragraph.)

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Posted: May 24, 2024, 06:27 am IST

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