The board of directors of Gildan (asi/56842) has scheduled a special shareholder meeting in which the fate of who will control the Top 40 supplier stands to be decided, but board members are also taking legal action that could prevent the meeting from ever happening.

It’s another twist in the corporate saga that’s enveloped the Montreal-headquartered vertically integrated manufacturer of apparel basics since the board fired co-founder/CEO Glenn Chamandy in December. Activist investors, led by Los Angeles-based firm Browning West, want to replace eight members of the current board, who would then reinstall Chamandy as CEO and as a director.

Browning West submitted a formal requisition calling for the special meeting to be held so shareholders could vote on its proposal. After studying the request and facing weeks of substantial pressure from shareholders, Gildan’s board decided to set a special meeting where the proposal would be considered. The meeting is currently scheduled for May 28 and will be held in conjunction with Gildan’s annual shareholder meeting.

Only the special meeting may never occur, if Gildan’s board gets its way.

That’s because the board, on Jan. 29, filed an application with the Quebec Court asking for a judgement that would declare Browning West’s requisition null and void. If the requisition were judged so by the court, the special meeting on the investment firm’s proposal would be cancelled, and barring another action, the current board would remain in place.

Gildan board members believe Browning West’s requisition should be invalidated because, directors allege, the firm violated the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 when it recently accumulated the additional shares in Gildan that the firm needed to legally call for the special meeting and vote for new board members.

“But for the violation of the HSR Act, Browning West would not have held sufficient shares to exercise the right to requisition a meeting under Canadian corporate law,” the Gildan board said in a statement. Directors are “significantly concerned that the basis for Browning West’s requisition – which they seek to use to take control of the board – was founded on an illegality.”

In the fight for control of Gildan, ousted former CEO Glenn Chamandy is hitting back hard, saying the board that fired him is waging a defamatory smear campaign against him and jeopardizing the future of the Top 40 #promoproducts supplier. https://t.co/9EesvBQ7Hk

— Chris Ruvo (@ChrisR_ASI) January 25, 2024

Browning West has said that its proposal has the support of investors who control approximately 35% of Gildan’s outstanding shares. The firm has accused the board of trying to stymie the will of investors while engaging in expensive self-serving tactics that aim to entrench directors in the Gildan boardroom and save reputations.

“Browning West is in no way deterred or intimidated,” the firm has said. “We are completely committed to taking all necessary steps, including through the legal and regulatory channels, to protect our investment and set a strong foundation for long-term value creation at Gildan.”

The board replaced Chamandy with Vince Tyra, who was formerly an executive at Fruit of the Loom and CEO of Broder Bros., which has evolved into Top 40 supplier alphabroder (asi/34063). Tyra started Jan. 15 as CEO of Gildan. The board says it has opened the door for Browning West to meet with Tyra.

Directors were critical of Chamandy after firing him, accusing him of having become an ineffective, disengaged leader without a clear vision for Gildan’s future, despite his success with growing the company into a global powerhouse earlier in his tenure. Chamandy hit back with a statement that accused the board of waging a smear campaign against him that’s “false, defamatory and misleading.”

In the past four years alone under Chamandy’s leadership, the former CEO said that Gildan’s “earnings per share increased by 87%, adjusted operating margins increased to 20% from 14%, and net sales increased by 15%. This strong financial position has delivered consistent buybacks and dividends to shareholders, which delivered in excess of $1.3 billion to shareholders over the past four years. Note that this period included the COVID-19 pandemic and two hurricanes impacting our operations in Honduras.”

Based on estimated 2022 North American promotional product revenue of $762.2 million, Gildan ranked fifth on Counselor’s most recent list of the largest suppliers in the industry.