Activist Files Lawsuit to Ensure Gildan Annual Meeting Takes Place as Scheduled

Vicki M. Young
·4 min read

Browning West wants the Canadian court system involved in its activist fight with Gildan Activewear.

“Rather than assume accountability for its value-destructive decisions, we believe that the [Gildan] board continues to take oppressive actions against shareholders, demonstrating that its priority is self-preservation. We are concerned that the board will seek to delay the Annual Meeting that has been set for May 28,” said Browning West co-founders Usman S. Nabi and Pete M. Lee.

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The investment firm on Monday filed a lawsuit in the commercial division of the Quebec Superior Court seeking an order to compel Gildan to hold the annual meeting as scheduled, as well as the appointment of an independent chair to oversee the meeting.

“The uncertainty about who will be leading Gildan into the future has already damaged, and is continuing to damage, Gildan and its stakeholders,” the court document said. “Any further delay to the [annual meeting] will be prejudicial to Gildan and its shareholders, including by increasing the risk of further executive departures (with the resulting loss of strategic and operational expertise), harm to broader employee morale, damage to customer and supplier relationships, and further share price decline.”

The Browning West cofounders said the lawsuit was needed to protect the rights of shareholders, including their ability to vote for board nominees. Guaranteeing that the meeting is held on May 28 “without [Gildan] employing any delay tactics or gamesmanship [will] ensure all shareholders have their votes counted,” the cofounders emphasized in a statement. The appointment of an independent chairman ensures that the meeting will be “conducted fairly and legally,” they said.

“While we expect Gildan to oppose Browning West’s application, we will not be deterred and will continue to do whatever is necessary to ensure that all shareholders have an opportunity to replace the directors whose decisions have destroyed shareholder value and who have failed to give due regard to the views of investors,” Nabi and Lee said. The activist investor wants to wipe out most of the Montreal company’s board.

The power play between Browning West and American Apparel owner began in December when the apparel manufacturer dismissed founder and its former long-time CEO Glenn Chamandy. Gildan’s board in an open letter to shareholders detailed how Chamandy failed to lived up to his part of a succession agreement, including charges that he “worked to entrench himself as CEO.”

In the court document, Gildan and its board of directors were alleged to have pursued their own strategy of entrenchment, obfuscation and disparagement of dissenting shareholders—all with the goal of “improperly placing their own personal interests ahead of the interests of the company and its shareholders.”

The lawsuit charged that the company leaked corporate documents and confidential information to the media, while refusing to share the information with shareholders. It also alleged that Gildan attempted to justify its decision to terminate Chamandy and name new CEO Vince Tyra with misleading explanations, among other allegations. Tyra began on Feb. 12, one month earlier than originally planned.

The document also said the board made false accusations that Browning West collaborated improperly with Chamandy when he was CEO. Ironically, Gildan later was accused by activist investor Anson Funds Management of striking a “backroom deal” with Coliseum Capital Management where it gets a board seat on Gildan in exchange for its support—what activists believe as a board entrenchment maneuver—of Gildan’s full slate of board nominees at each of its 2024 and 2025 Annual Meeting of Shareholders.

The lawsuit also charged that the Gildan board has been meeting with shareholders to convince them to support the board and Tyra. Calling the alleged series of meetings a “road show,” Browning charged that Gildan’s board is violation of proxy solicitation rules.

Gildan did not respond to a request for comment by press time.

Browning West is joined by eight other investors—Turtle Creek Asset Management, Jarislowsky Fraser Ltd., Cooke & Bieler LP, Pzena Investment Management, LLC, Janus Henderson, Anson Funds Management LP and Anson Advisors Inc., Oakcliff Capital and Cardinal Capital Management—seeking board change. The investors together control 35 percent of Gildan’s outstanding shares. Their aim is the ouster of Tyra and the reinstatement of former CEO Glenn Chamandy.

Gildan last month posted an 82.7 percent jump in fourth-quarter net income to $153.3 million, or 89 cents a diluted share, on an 8.7 percent increase in net sales to $782.7 million. For the year ended Dec. 31, 2023, net income slipped 1.5 percent to $533.6 million, or $3.03 a diluted share, on a net sales decline of 1.4 percent to $3.2 billion. Adjusted diluted earnings per share (EPS) were 75 cents in the quarter and $2.57 for the year.

Tyra, who spoke about innovation at its Honduras plant and the opportunity in ring spun and fleece, said Gildan’s “DNA is to be a low-cost producer.”