Drama continues to unfold in the wake of Gildan Activewear’s (PPAI 250187, S13) sudden dismissal of co-founder Glenn J. Chamandy from his former position as CEO in December.
- Earlier this month Browning West, an activist fund that holds about 5% of Gildan’s outstanding shares, publicly escalated its fight with the Gildan board when it requested a special meeting to reconstitute the board and reinstate Chamandy.
- In response, the Gildan board has claimed that Browning West’s recent purchase of Gildan shares was illegal, having violated U.S. antitrust laws.
Gildan Activewear was ranked as the No. 38 supplier in the inaugural PPAI 100.
There is plenty of he-said-she-said to keep up with since the dismissal of Chamandy. Below is an overview of the controversy, including the recent developments involving antitrust allegations.
Chamandy’s Removal And Browning West’s Open Letter
Following Chamandy’s ousting as CEO, Browning West issued an open letter to shareholders December 29 announcing its plan to repopulate the Gildan board.
- This plan would involve firing Chamandy’s newly appointed successor Vince Tyra, a former CEO and director of alphabroder.
- It would also reinstate Chamandy.
“The incumbent directors’ actions have destroyed value for Gildan shareholders and introduced significant business risk, which we believe must be immediately addressed through a reconstitution of the board to prevent further damage to Gildan’s business and its stakeholders,” the letter states.”
- During this time, Chamandy claimed that he was “terminated without cause.”
The Gildan board responded in early January with its own open letter to shareholders, “setting the record straight” regarding the motivation behind terminating Chamandy.
- In this open letter, the board called Chamandy “disengaged,” “unstructured” and having “no credible long-term strategy and no vision for the future.”
- It also accused him of being focused on outside personal pursuits – including the development of a golf resort in Barbados – and said retaining Chamandy would have “jeopardized the future of Gildan and destroyed shareholder value.”
To bolster its case, the Gildan board has submitted details in support of its decision and sought a third-party assessment of its governance.
- Gildan’s board has released a timeline, beginning with a 2021 succession plan, that reportedly shows that Chamandy, despite the plan, had “no intention of leaving.”
- The board retained Dr. Richard W. Leblanc, a Canadian expert on corporate governance and accountability, to produce a report analyzing its succession-planning process.
Antitrust Allegations Toward Browning West
On Sunday, Gildan said that Browning West’s purchase of Gildan shares last month violated U.S. antitrust laws.
- According to Gildan, Browning West did not notify the U.S. Federal Trade Commission and U.S. Department of Justice about the acquisition of voting securities while failing to comply with the mandatory 30-day waiting period.
- Additionally, Gildan suggests this “illegal” move is simply part of an attempt to reappoint Chamandy by “barely putting it over the [5% ownership] threshold” required to request a special meeting of all shareholders.
“Browning West’s rapid and illegal share acquisitions were undertaken as a necessary part of its scheme to take control of the company and its board and reinstall Mr. Chamandy,” Gildan’s statement reads.
- Browning West has stated that it did not breach any antitrust violations because it is exempt from filing and waiting period requirements.
Browning West immediately responded to these allegations in yet another letter to shareholders, describing them as “Gildan Activewear’s efforts to deprive shareholders of an opportunity to reconstitute the board.”
“We are writing to alert you that the board is now resorting to desperate and egregious entrenchment maneuvers to try to deprive you of the opportunity to replace the directors responsible for recent missteps and value destruction with Browning West’s highly qualified director candidates at a special meeting,” the letter reads.
- In a related development, Turtle Creek Asset Management, another Gildan shareholder, has issued an open letter to the Gildan board, calling on it to cease “its attempts to disenfranchise shareholders” in reference to the antitrust accusations.
“You are not entitled to stop the shareholders from voting on who they wish to represent them on the board of their company,” Turtle Creek’s open later states to the Gildan board. “And while we respect your right to communicate your reasons, we urge you to conduct yourselves in a professional manner. Your current destructive PR campaign of inferences and innuendo is, quite frankly, embarrassing to the company and to each of you. For the sake of each of your reputations, and for the sake of the company, we urge you to end it.”
- Browning West, Turtle Creek and other investors who have joined in the demand for a special meeting now represent 35% of voting shares of Gildan stock.
