Top 40 supplier Gildan (asi/56842) is up for sale, and a private equity firm that owns a Top 40 distributorship is reportedly an interested buyer. Other suitors with promo connections are also said to be interested.  

Gildan's board of directors has put together a special committee that is in talks with an unspecified number of bidders interested in purchasing the Montreal-headquartered vertically integrated manufacturer of apparel basics.

The Globe and Mail reported that Gildan, whose owned brands include American Apparel, received a takeover pitch from a would-be buyer within the last four weeks. The board then asked financial consultants RBC Capital Markets, Goldman Sachs Group and Canaccord Genuity Group Inc. to investigate if others might be interested in buying the company, according to reports.

“The special committee determined that it was consistent with its fiduciary duties and in the best interests of Gildan to contact other potential bidders with a view to maximizing the value of any potential transaction,” Simon Beauchemin, Gildan's spokesperson, told Reuters.

Private equity firm Sycamore Partners, which owns Staples, parent company of Top 40 distributor Staples Promotional Products (asi/120601), is reportedly one of the interested buyers, a report from Bloomberg News indicated.

Based in New York, Sycamore acquired Staples in 2017. Sycamore specializes in consumer, distribution and retail-related investments, managing about $10 billion in aggregate committed capital. The PE firm has been the subject of criticism.

Other potential buyers include Warren Buffett's multi-national conglomerate Berkshire Hathaway, whose holdings include Fruit of the Loom (asi/84257), and Clayton, Dubilier & Rice, a private equity firm with a reported $57 billion in assets under management who owns Top 40 supplier S&S Activewear (asi/84358).

There’s no guarantee a sale will occur.

Word on a potential sale comes as Gildan is embroiled in a bitter corporate dispute with activist investors and former CEO Glenn Chamandy.

Los Angeles-based investment firm Browning West – which holds about 5% of Gildan’s outstanding shares – is leading a charge to replace eight current board members with new ones.

If appointed, the new board members would likely reinstate Chamandy, the company’s co-founder, as CEO.

The board fired Chamandy in December 2023 and replaced him with Vince Tyra, an experienced executive with a background that includes private equity and serving as CEO of Broder Bros., which has since evolved into Top 40 supplier alphabroder (asi/34063).

The Gildan saga continues.https://t.co/tIXG7ohSOh

— Chris Ruvo (@ChrisR_ASI) March 12, 2024

A vote on Browning West’s plan is currently expected at the May 28^th annual shareholder meeting, but the investment firm now wants the board shake up to occur even sooner in the wake of the potential sale announcement. The firm believes that the board has demonstrated a lack of competence in its CEO search and, among other issues, that directors are trying to avoid accountability at the annual meeting. 

“The board’s reactionary sale process underscores our message to shareholders last week that a meaningful reconstitution of the board is immediately required,” Browning West said in a statement. “Under no circumstances can the current board be trusted to oversee a sale process.”

Last week, Browning West sued Gildan and its board, in part to ensure a fair and honest vote on the board member replacement proposal occurs.

Gildan’s stock price increased following reports of the possible sale. On March 18^th, the price was around $33.57. As of the morning of March 20^th, it was trading around $38.20 – a nearly 14% increase.

The Globe and Mail reported this week that Gildan was considering offers at $42 per share to be adequate in a potential sale. Browning West takes issue with that.

“We believe that the company’s owners would be dismayed at the rumored $42 USD per share indication from a potential buyer, which effectively represents no premium," BW said in its statement. "To put this low price in context, if Glenn Chamandy had not been terminated and the stock had simply performed in line with the most relevant index, it would be worth approximately $42 USD per share today. We believe that the stock will recover to at least this level after our experienced and credible slate is elected in May, and it could, in our view, be worth multiples of that level over the long term.”