(Bloomberg) — The entire board of directors of Gildan Activewear Inc. and Chief Executive Officer Vince Tyra resigned, conceding defeat after a nail-biting five-month battle with an activist shareholder over the future of the Canadian clothing maker.
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The mass resignation is a victory for Los Angeles-based investment firm Browning West LP, owner of about 5% of Gildan’s stock. It gains control of the board, installs Michael Kneeland, chairman of United Rentals Inc. as chairman and reinstates Glenn Chamandy as CEO.
Gildan’s board made the decision after shareholders “made their positions clear” ahead of an investor meeting scheduled for May 28. Browning West said preliminary results suggested an “overwhelming majority” of shares would be voted in favor of the eight proposed directors at that meeting. .
The outgoing board has halted all discussions about a previously announced sale process, Gildan said in a statement late Thursday.
The company, one of the world’s largest makers of affordable T-shirts and owner of the American Apparel brand, has been embroiled in a toxic feud for months over its direction and who should be in charge. Browning West launched a campaign to oust the board in December after directors fired Chamandy and replaced him with Tyra, a former director of Fruit of the Loom and former athletics director at the University of Louisville.
Montreal-based Gildan, founded by Chamandy’s grandfather, has become a $6 billion company thanks to a strategy of manufacturing in countries with cheap labor, allowing it to become a low-cost supplier of T-shirts and other apparel to retailers such as Walmart. Inc. and to print clothing stores and designers.
The board had accused Chamandy of being a reclusive CEO, delaying an agreed succession plan and pursuing a risky takeover strategy. He proposed acquiring two distributors for more than $3 billion, according to documents seen by Bloomberg News.
But shareholders, led by Browning, as well as other major investors such as Jarislowsky Fraser and Janus Henderson Group, rallied behind Chamandy and called for his reinstatement.
The very public proxy battle prompted Gildan to reconsider his governance just a month ago. On May 1, five directors resigned and replacements were appointed, including former director of Goldman Sachs Group Inc. Tim Hodgson as chairman. Another two said they would leave at next week’s shareholders meeting.
But it wasn’t enough. In recent days, proxy advisors Institutional Shareholder Services and Glass Lewis have backed Browning West. Unusually, that was also the case with a group of Gildan executives, who wrote a letter to shareholders suggesting they support the investment firm’s efforts to bring back Chamandy.
‘Preferred result’
In March, Browning West and Chamandy presented plans to increase sales, borrow more money and accelerate share buybacks to boost the share price. Their strategy suggested that Gildan, which employs about 43,000 people worldwide, should shift more of its production to a factory in Bangladesh and away from Honduras, where energy and labor costs are higher, and focus on trying to grow in higher segments of the economy. market, such as fleece products and clothing with better quality fabrics.
Their goal is to increase the stock price to $60 by the end of next year and to more than $100 in about five years. Gildan closed at $35.55 in New York on Thursday.
“Our directors are eager to begin working toward their shared goal of delivering greater shareholder value, which begins with the reinstatement of Glenn Chamandy as CEO,” Usman Nabi and Peter Lee of Browning West said in a statement.
“Glenn is a visionary leader with a track record of value creation, unparalleled knowledge of Gildan’s manufacturing operations, a deep connection with the company’s employees and shareholders, and an impressive ability to foresee significant industry shifts to make Gildan a to stay one step ahead of the competition. ”
Desjardins analyst Chris Li wrote that Browning West’s win “is the desired outcome,” and that putting a conservative multiple on Gildan’s projected earnings should support a valuation of $45 per share. “But volatility may persist in the near term as shareholder turnover and macroeconomic challenges limit visibility on demand.”
–With help from Peter Vercoe.
(Updates with commentary from Desjardins analyst.)
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