With no resolution in sight, Gildan Activewear activist investor Browning West is charging forward with plans to overhaul the Hanesbrands rival’s embattled board after its ouster last month of longtime CEO Glenn Chamandy ignited a succession firestorm and faceoff.
On Friday the nearly four-year-old Los Angeles investor advised Gildan shareholders of its plan to hold a special meeting aimed at revamping the basics maker’s board by replacing five incumbents with its own director nominees. Once Browning West’s actors take over, according to a letter to shareholders, the new Gildan board will have the power to recall Glenn Chamandy as CEO and sideline Vince Tyra, the executive scheduled to take the spot on Feb. 12.
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The dispute erupted on Dec. 11 when Gildan seemingly pushed out Chamandy, who also co-founded the Canadian giant, after four decades. The CEO change shocked investors and shareholders, including Browning West, who demanded Chamandy’s reinstatement. Other investors joining Browning West’s call to restore the veteran executive include Turtle Creek Asset Management Inc., Anson Funds Management LP, Oakcliff Capital, Jarislowsky Fraser Ltd, Cooke & Bieler LP, Pzena Investment Management Inc. and Janus Henderson. Together they control more than 35 percent of Gildan’s outstanding shares.
Chamandy and Gildan have different views on the terms of his dismissal. While the company claims his exit relates to a three-year old succession plan agreement, Chamandy countered by alleging he was terminated without cause. Gildan’s board also didn’t seem to like Chamandy’s future strategy for the company.
Gildan board chair Donald C. Berg fired back by accusing Chamandy of failing to live up to his part of the agreement, noting that while he “agreed to follow the original succession timeline, he later worked to entrench himself as CEO.” Berg also said Chamandy’s “high-risk” proposal would shift the company “away from its core area of manufacturing experience.” The mudslinging included allegations that Chamandy never intended to stick to the succession agreement, and quoted him saying in published interview that he would step down when he thought the timing was right.
Chamandy issued a statement on Dec. 18 charging that the statements in Berg’s shareholder letter amounted to “sideshow” engineered to distract from shareholders’ response to how the board handled succession planning.
Browning West wants to appoint former United Rentals chairman and CEO Michael Kneeland, Chamandy, Browning West cofounder and partner Peter Lee, former Walmart Inc. senior vice president Karen Stuckey, who led the discounter’s private label strategy including apparel, and Rona Inc. CFO J.P. Towner to the Gildan board. Towner was also former CFO at Dollarama Inc., and has experience working in vertically integrated businesses focused on value-oriented consumer products, said Browning West, which would name Kneeland as independent non-executive chair.
Browning West also took issue with the current board’s “support agreement” with Coliseum Capital Management, calling it a “backroom deal” that essentially entrenches the board. That’s because Coliseum vowed to support Gildan’s board nominees this year and next.
“Gildan’s board has demonstrated it is unwilling to act in the best interest of the Company and its shareholders. The incumbent directors’ actions have destroyed value for Gildan shareholders and introduced significant business risk, which we believe must be immediately addressed through a reconstitution of the board to prevent further damage to Gildan’s business and its stakeholders,” wrote Browning West cofounders Lee and Usman S. Nabi.
Chamandy and his brother Greg Chamandy founded Gildan in 1984. In the third quarter, the American Apparel owner reported $127.4 million in net income, a 16.7 percent decline, and $869.9 million in net sales, up 2.3 percent.
