The Gildan-Browning West board battle is now centered over possible antitrust violations, but that likely depends on which law—American or Canadian—applies.
Gildan’s board on Sunday charged Browning West with U.S. antitrust violations connected with its acquisition of company shares. The battle between the American Apparel owner and its activist investor began in December after the activewear firm ousted its co-founder and longtime CEO Glenn Chamandy. That didn’t sit well with shareholders Browning West and Turtle Creek Asset Management Inc., who wanted Chamandy reinstated as CEO. The two investors, with Browning West leading the charge, were later joined by others, who together now hold 35 percent of the voting shares of Gildan stock. Meanwhile, Vince Tyra, Chamandy’s replacement, was asked by the board to take on the CEO role one month earlier than planned. And Chamandy has been under fire too, as Gildan’s board attacked him for his “false narrative” over the circumstances that led to his exit from the company.
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The battle for control of the Gildan board has continued, with each side pitching its best arguments as to which team—Gildan’s board incumbents versus Browning West’s proposed board slate—is most qualified to preserve shareholder rights.
“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 said on Sunday. The company said that the investor accumulated shares in violation of U.S. antitrust law, which statutorily requires certain notices and a mandatory 30-day waiting period before the acquisition of new voting shares.
Gildan also said that under the Canada Business Corporations Act, shareholders can ask for a special meeting of shareholders only if they hold more than 5 percent of a company’s shares. Excluding the alleged illegal share acquisitions, the Browning West share ownership is under the required threshold and the investor “would have no legal rights to requisition a meeting,” Gildan said.
A spokesperson for Browning West confirmed that it informed Gildan it did not breach the HSR Act because the firm is exempt from filing and waiting period requirements.
Browning West on Sunday fired back that the Gildan board is “now resorting to desperate and egregious entrenchment maneuvers.” It charged that the board “has no respect for corporate democracy or the shareholder franchise.” The investor also called the Gildan allegation that it violated U.S. antitrust law a “false premise” to avoid its demands for a special meeting. Browning West said it knew that the board hired “at least three law firms, two investment banks, a public relations firm, a proxy solicitor and a private investigator,” for the board battle with shareholders paying for the professional fees.
Moreover, the activist also charged that Gildan played dirty in hiring a law firm that has worked “continuously” with Browning West since its fund’s inception, pointing out that the hiring was for “activism defense services” without first obtaining a Browning West conflict waiver.
“This is a deplorable tactic that poses serious legal and ethical issues, and we are deeply concerned that Browning West’s confidential information has been shared with Gildan and its advisors,” the activist investor said, adding that despite the board’s “disturbing actions,” it was in “no way deterred or intimidated.”