Proxy Battle at Gildan Heading Toward Climax

The Gildan Activewear board’s battle with its activist investors could get nastier now that a meeting date has been set.

Gildan on Monday set May 28 as the day for its annual shareholders’ meeting, as well as the special shareholders’ meeting requested by activist Browning West to reconstitute the board. That date sets the stage for the two to begin mailing out proxy notices and corresponding materials connected to board nominees at least 40 days before the meeting date.

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Gildan may have already given itself a head start last Tuesday when its provided details on the timeline of events leading up to the removal of former CEO Glenn Chamandy. The timeline provided examples of when Chamandy allegedly became a disengaged CEO. Gildan has charged Chamandy with providing a “false narrative” of events.

Chamandy, in turn, said last Tuesday that Gildan’s allegations are “false, defamatory and misleading.” He said he was terminated on Dec. 10 “without cause,” and charged that the board perpetuated a plan to “undermine my reputation.”

“The Board’s poor governance, failed shareholder engagement, and obsession with self-entrenchment has been on full display,” Chamandy said.

And while the board has said that Chamandy’s hosting of a past visit by Browning West to the company’s Honduras manufacturing plant was an indication that he gave the activist preferential treatment, Chamandy said that the visit was “organized by the company’s investor relations team.”

The removal of Chamandy in December led to a trading of barbs between Gildan and several activists, as each side spun its own tale of why its position justified either Chamandy’s removal or the need for board change.

Browning West isn’t the only one seeking board change and the reinstatement of Chamandy. It 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. The influential investors together control 35 percent of Gildan’s outstanding shares. The proxy fight is for control of the remaining 65 percent of the voting shares.

Browning has said it had no choice but to pick additional nominees because indications are that Gildan’s current board “is far more entrenched than we had previously imagined.” Other activists have jumped in to voice their concerns.

Turtle Creek last week rebuked the Gildan board, telling its members that they “have a legal and moral responsibility to act as independent fiduciaries for shareholders, even when those shareholders disagree with you and seek to have you replaced.” The hedge fund also reminded the board to “conduct yourselves in a professional manner,” adding that its current “destructive PR campaign of inferences and innuendo” is both “embarrassing” to the company and board members.

And Pzena portfolio manager Akhil Subramanian told Bloomberg in a story Friday that the board needs to “let the shareholders decide on who they wish to represent them.”

Browning West wasn’t pleased, noting on Monday it had requested that the special meeting to reconstitute the board be held in March, and the date Gildan chose is “nearly five months” after it “submitted a valid” request.

“Through its actions, including refusing to set a timely date for the meeting, the board is once again demonstrating a complete disregard for sound corporate governance and a total lack of respect for the will of shareholders,” Browning West cofounders Usman S. Nabi and Peter M. Lee said in a statement.

As for Gildan’s plan to have a Canadian court declare the special meeting request “null and void” based on U.S. antitrust violations in connection with the acquisition of Gildan shares, the Browning West cofounders said they “are severely disappointed by the board’s continued attempts to distract shareholders by focusing on a U.S. regulatory question that is entirely irrelevant to our valid requisition under Canadian law.”

The two said the legal move is a waste of shareholder resources, pointing to the Gildan board’s own press release that said a “speedy resolution of this unnecessary proxy contest is in the best interest” of the company and its shareholders. The two went on to note that Gildan “is being led astray” by a legal team that is “economically incentivized to recommend scorched-earth tactics.”

Browning West did not address Gildan’s offer to meet with Vince Tyra, who succeeded Chamandy and, at the board’s request, began his tenure as CEO one month earlier than planned. Gildan said it also requested to meet with Browning West’s nominees to better understand their viewpoints and skill sets, although it noted that the investment firm has “so far refused” any form of engagement.

The story has been updated to include Browning West’s response.