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April 08, 2024

Gildan Investor Wants Court to Block Sale of Company Prior to Shareholder Meeting

Los Angeles-based firm Browning West thinks shareholders will be harmed if an agreement were to be struck before a May 28 meeting that could see the current company board reconstituted.

By  Christopher Ruvo

An activist investor is asking a judge in Quebec Superior Court to prohibit Top 40 supplier Gildan (asi/56842) and its board of directors from entering into an agreement to sell the Montreal-headquartered apparel manufacturer before the annual shareholder meeting on May 28.

“Any agreement for the sale of Gildan entered into prior to the (meeting) risks irreparable harm to Gildan and its shareholders and risks interfering with the meaningful exercise of shareholders’ fundamental democratic rights,” read the complaint filed by Browning West, a Los Angeles-based investment firm that holds about 5% of publicly traded Gildan’s outstanding shares.

Amid a corporate battle with fired former CEO Glenn Chamandy, Browning West and other activist investors, Gildan’s board announced in March that it was considering proposals from buyers interested in acquiring the company.

The board of the multibillion-dollar corporation has reportedly set April 10 as the deadline for receiving initial offers from interested parties, which are said to include private equity firms that own other Top 40 promotional products companies.

Browning West is keen to block a sale agreement prior to the May 28 meeting because it’s there that the firm expects other Gildan stockholders to vote on a plan it has put forward that calls for replacing eight current company board members. If elected, the new Browning West-backed directors would likely re-appoint Chamandy as CEO. The board fired Chamandy in December, touching off what’s turned into a corporate war over the future leadership and direction of Gildan.

“The unique circumstances which exist here, where the current board has exhibited a willingness to act in its own interest over that of Gildan and where the majority of the board understands its ouster at the (shareholder meeting) is highly likely, the ability of the board to negotiate in the best interests of Gildan is highly questionable,” Browning West’s complaint read.

Browning West asserted that the uncertainty over the future leadership of Gildan puts the board in a weak negotiating position. Furthermore, Browning West raised concerns about a “break fee” if the current board were to agree to a deal and then that deal was not to go through. Such a fee could be payable to the prospective buyer, along with possibly payment of that purchaser’s expenses if a deal failed “…whether at the behest of the reconstituted board or through the shareholders declining to vote in favor of the transaction,” the complaint said.

Browning West added that it “reserves the right to take further action and to claim damages against the members of the board, whether on its own behalf or on behalf of the company by means of a derivative action, as it sees fit.”

Gildan hadn’t responded to a request for comment as of this writing.

Interested bidders for Gildan reportedly include private equity firm Sycamore Partners, which owns Staples, parent company of Top 40 distributor Staples Promotional Products (asi/120601). Sycamore specializes in consumer, distribution and retail-related investments, managing about $10 billion in aggregate committed capital.

Clayton, Dubilier & Rice, a private equity firm with a reported $57 billion in assets under management and owner of Top 40 supplier S&S Activewear (asi/84358), is also said to be interested. Bain Capital, a Boston-headquartered private investment firm with a stated $180 billion in assets under management, is reportedly another Gildan suitor. Bain’s portfolio currently includes apparel companies such as Varsity Brands and Canada Goose.

Last week, the eight business leaders who are aiming to take seats on the board released a five-pillared plan that they say, if executed correctly, could increase Gildan’s share price to more than $100 within five years.

Based on estimated 2022 North American promo product revenue of $762.2 million, Gildan ranked fifth on Counselor’s most recent list of the largest suppliers in the industry. In February, Gildan reported that total global full-year sales across all its business divisions – more than just promo – fell 1.4% year over year in 2023 to about $3.19 billion. Vince Tyra replaced Chamandy as CEO.