Advantage, Browning West.
Gildan Activewear Inc. and its activist Browning West have been volleying back-and-forth trying to one-up each other in garnering shareholder support for the upcoming proxy battle on May 28, the date of the annual shareholders meeting.
But the activist appears to be entering this fight with the upper hand. As of Monday, it can tell shareholders that it has the support of the two leading proxy advisory firms—Institutional Shareholder Services (ISS) and Glass Lewis. The two firms advise on proxy voting, and they base their recommendations on corporate governance principles.
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The ISS and Glass Lewis recommendations are another win for Browning West and the eight institutional investors that support the activist’s push for a reconstitution of Gildan’s board. Last week, Browning disclosed that the lawsuits and claims filed by Gildan against the investment firm were dismissed by both the Quebec Superior Court and the Quebec Financial Markets Administrative Tribunal as having no merit. The Superior court claim alleged antitrust charges and the petition before the Tribunal was in connection with Browning West’s solicitation of proxies. The activist called the Gildan battle the “most expensive proxy fight in Canadian history,” totaling $17.1 million through March 31.
The battle for board control began in December when Gildan fired co-founder and longtime former CEO Glenn Chamandy. They want to install a new board that will axe current CEO Vince Tyra and reinstall his predecessor.
The fight has included myriad of allegations and mudslinging for the last five months. The battle drew attention to the underwear and T-shirt manufacturer and, in March, Gildan said the company was up for sale after receiving an unsolicited, nonbinding offer. The American Apparel owner also refreshed its board in April, one month before the annual shareholders’ meeting.
Last Monday, Gildan filed an investor presentation that disclosed it hired a leading corporate governance expert, Dr. Richard LeBlanc, after firing Chamandy, to evaluate its succession process. According to Gildan, LeBlanc opined that the company took “reasonable steps” that one would expect from a Canadian public company board. He also concluded that the board followed a “good and rigorous process” in succession planning. Gildan concluded it doesn’t have a corporate governance problem. Last Friday, Gildan uploaded another investor presentation, one that said it considered 515 internal and external candidates, and did 32 reference checks just on Tyra.
Gildan’s position that its corporate governance is kosher got upended by the ISS and Glass Lewis recommendations. A request to Gildan for comment via email resulted in an automatic response that the corporate communications director is out of the office.
According to Browning West’s excerpts from the ISS report, there were concerns regarding the legacy board’s decision to replace Chamandy following the proxy advisory firm’s review of Gildan’s operational performance, shareholder returns, operating plan and circumstances surrounding the CEO change. It also said that the decision by a majority of the legacy directors to “resign and appoint their own replacements” underscores those concerns. ISS found that Tyra doesn’t have a “recent track record” as an operator in the industry.
In the activist’s excerpts from the Glass Lewis report, one cited as “troubling” the resignation of previous directors “before investors could hold them accountable,” along with self-selecting their own replacements. The firm said it was “struck by the number of large, long-term shareholders that have come out against the incumbent board.” It also said the need for retention award to continuing executives for the current 2024 fiscal year “suggests a poorly planned CEO transition.” And the proxy firm said it didn’t see sufficient evidence of value destruction at Gildan to have warranted removal of Chamandy.
“We appreciate the ringing endorsement both leading independent proxy advisory firms have given our entire slate of director candidates,” Browning West cofounders Usman S. Nabi and Peter M. Lee said in a statement. “In their reports, both ISS and Glass Lewis rebuke the current Board and determine that it erred in terminating proven value creator Glenn Chamandy, which serves as a conclusive and independent validation of the arguments that we and many other shareholders have voiced since last December.”
The activist is encouraging shareholders to use the Gold proxy card, voting in favor of Browning West’s eight nominees and withholding votes on all ten of Gildan’s slate of nominees.
