Time to dust off the Blue and White proxy cards because the Gildan Activewear and Browning West board battle isn’t showing any signs of a settlement.
In fact, Gildan on Monday gave the impression that the activist investor was playing hardball to get its way, namely getting its own board slate nominated so they can reinstate former CEO and Gildan co-founder Glenn Chamandy to the chief executive post. Gildan last Monday disclosed that it had reconstituted the company’s board of directors, which included a recommendation at the May 28 annual shareholders‘ meeting to nominate to the board two of the activist’s nominees.
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Browning West has hurled some harsh words against Chamandy’s successor Vince Tyra and his track record starting with his tenure years ago at Fruit of the Loom, a Gildan competitor. Given the bad blood between Gildan and Browining West, the underwear and T-shirt manufacturer returned the favor on Monday, volleying back attacks on the investment firm’s two founders and their track record in past board battles.
“Over the last several months, the Board has attempted to reach a settlement agreement with Browning West and offered multiple times to interview its candidates so that the Board could consider those candidates for nomination at the 2024 Annual Meeting,” Gildan said. “Good faith efforts by the Company were repeatedly rebuffed by the activist hedge fund.”
The company also said that its board made Browning West aware of its willingness to engage in a “balanced refreshment process” that considered both their views and other shareholders.
Gildan previously said the five-month process to reconstitute the board included 87 meetings with shareholders, including some Browing West supporters. Gildan said those meetings gave it a clear direction on the type of board that shareholders wanted to see moving forward, including a requirement that a “focused” board work together collaboratively.
“Unfortunately Browning West made it clear that the only changes it was willing to accept were changes that benefited Browning West exclusively, prolonging this unnecessary proxy fight,” Gildan said. It addded that while Gildan’s Governance Committee attempted to meet with certain Browning West nominees to discuss their possible addition to the board, the activist investor “precluded its nominees from participating in any such meetings.”
Gildan reiterated that the reason why Chamandy was fired was because he was “putting his personal interests ahead of the company’s,” which resulted in the business losing momentum and growth was stagnating.
Earlier this month, Chamandy’s successor Vince Tyra said the company’s supply chain is its top pillar for growth. He made that disclosure during an investor update, noting that the company was continuing with its Gildan Sustainable Growth (GSG) strategy. The move-forward plan was in place prior to Tyra joining the firm, although he appears to have tweaked it to include a focus on growth in international markets.
Gildan is set to report first-quarter results on Wednesday after the equity markets close. UBS softlines analyst Jay Sole wrote in a research note Monday that Gildan already provided a preliminary first quarter update that included a reaffimration of its Fiscal year 2024 guidance.
“Our conversations with investors suggest they remain focused on the looming proxy contest as well as potential sale discussions (part of Gildan’s stated strategy). Our view is Gildan’s [first-quarter report] is unlikely to provide meaningful new information on how either of those potential catalysts will play out,” Sole wrote. The analyst has a “neutral” rating on shares of Gildan stock.
So far North American retail sales seem “relatively” resilient. “We believe nearshoring and the ‘creator economy’ are two trends that will drive imprintable industry sales growth rates above historical levels for the next two years,” Sole concluded. He added that Gildan’s expansion of its international imprintables could provide a compound annual growth rate of 7 percent.
Gildan in March put itself up for sale after receipt of a confidential nonbinding expression of interest to acquire the company. Browning West was first to note rumblings that the take-private offer was in the range of $42 per share. The activist was also first to allege that the board reconstitution was a camouflage of what was really going on behind the scenes, which it charged was “likely triggered by the collapse of the [Gildan] Board’s reactive sale process, which it is clearly trying to bury in the 2,500+ word press release.”
But according to Gildan on Monday, its board continues to review strategic alternatives “through dialogue with potential bidders.” Gildan emphasized that despite the activist’s stance against considering any alternative, the “ongoing process is robust and will be measure against the value creation potential of our compelling current [GSG] strategic plan.” The company noted that shareholders are the ones who will ultimately decide whether to accept any offer.
Browning West executives could not be reached for comment.
