Gildan Activewear ousted CEO after showdown with board over grand expansion plan, director says

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The turmoil now engulfing Gildan Activewear Inc. GIL-T was triggered by an ultimatum the clothing maker’s former CEO gave to the board seeking its approval to do two to three multibillion-dollar acquisitions outside the company’s core manufacturing business, says a Gildan director.

Glenn Chamandy made the ultimatum at a Gildan board meeting on Oct. 31, director Luc Jobin told The Globe and Mail in an interview Sunday. He said the board was averse to the idea of making the takeovers without greater certainty they could be accomplished, which became tied to the issue of chief executive officer succession at the company and eventually led to the CEO’s ouster last week.

Mr. Chamandy demanded the board agree to begin the takeover process within six months and that he also be allowed to stay on as CEO for at least two years to groom a successor from within the company, Mr. Jobin said. From that point on, Mr. Chamandy did not engage with the board to try to flesh out a takeover strategy or talk more deeply about succession, he said.

“Glenn basically said: ‘Listen, either you accept the plan and you have to get back to me within a matter of weeks or … I will leave and you can terminate me,” Mr. Jobin said. “He was absolutely breathing heavy on the board.”

Mr. Jobin declined to name the takeover targets.

What’s happening at Gildan? A timeline of the months-long CEO corporate battle

The Montreal-based T-shirt and sock maker shocked financial markets last Monday when it said that it had dismissed Mr. Chamandy after a 40-year tenure at the company, the past 20 years as CEO. It named former Fruit of the Loom executive Vince Tyra as his replacement. Mr. Tyra is scheduled to start in February.

In a statement Monday morning, Mr. Chamandy, whose family launched Gildan, denied he gave any ultimatum to the board with respect to any strategy or potential acquisitions.

“This is a sideshow to distract from the reaction the shareholders have had with respect to the board’s handling of succession planning, in which I was not involved,” Mr. Chamandy said. “I did not and could not orchestrate or control the events; the board conducted the process.”

The former CEO told The Globe on Friday that he had no plans to leave his job as CEO and that the board’s decision to dump him is the result of a “failed process” that blindsided investors.

Several large shareholders have since called for Mr. Chamandy’s reinstatement. They include Montreal investment firm Jarislowsky Fraser Ltd., which holds a 6.9-per-cent stake in Gildan, and Janus Henderson, which owns 4.2 per cent of the company.

The board’s decision to axe Mr. Chamandy was “a mistake that is destructive to shareholder value,” Janus portfolio manager Brian Demain and analyst Tom Roller wrote in a letter to Gildan’s board dated Monday Dec.18 that was seen by The Globe.

“If the board does not reverse its decision and reinstate Chamandy as CEO, this would expose shareholders to risks including further executive departures, loss of strategic and operational insight, impairment of employee goodwill, and weakening of customer relationships,” the men said in their correspondence. A Janus spokesperson confirmed the letter’s contents.

Investor anger has increased pressure on the board, which vowed over the weekend to circle back to shareholders this week to offer more explanation. At least one shareholder siding with Mr. Chamandy, Los Angeles-based hedge fund Browning West, has said it would apply for a special shareholders meeting to reconstitute the board if it doesn’t give the former CEO his job back.

Gildan shareholders demand company reinstate CEO, claiming succession was mishandled

The other top 10 shareholders that have gone public urging the reinstatement of Mr. Chamandy are New York-based Pzena Investment Management and Toronto-based investment management firm Turtle Creek Asset Management. Mr. Chamandy said he’d consider a return if asked.

Those shareholders don’t necessarily have a complete picture of what happened, said Mr. Jobin, who steers Gildan’s audit and finance committee and sits on Gildan’s human resource committee.

“Up to this point, you know, the story may be seen as a board letting go a CEO. But it’s really about a CEO trying to unseat and fire his board,” he said, adding Mr. Chamandy has a following among certain activist institutional investors.

Gildan has won over at least one key shareholder. The company announced late Sunday that it struck a support agreement with Coliseum Capital Management LLC, a Rowayton, Conn.-based hedge fund, by which Coliseum will support Gildan’s full slate of board nominees at its next two annual meetings.

Coliseum, which has a roughly 6-per-cent stake in the company, intends to increase its investment in Gildan over time to become its biggest shareholder, Gildan said. Christopher Shackelton, Coliseum’s co-founder and managing partner, has joined Gildan’s board, the company said.

Gildan began looking more seriously at CEO succession in 2018, but over the past five years Mr. Chamandy has been “unsuccessful and frankly unable” to groom someone from the inside to replace him, Mr. Jobin said. At one point in 2021, Mr. Chamandy expressed a desire to look at retiring within three to five years, he said.

By this year, the board still viewed the option of developing an internal candidate as viable. But it was also looking at external candidates to see who was out there and whether there might be someone else that could step into the role, Mr. Jobin said.

Directors also wanted to make sure that if the company ever did move forward with the transactions Mr. Chamandy championed, that they would have the management strength to make them work, Mr. Jobin said. Integrating other companies might take several years.

Mr. Chamandy told the board he was the best placed to steer the company through the acquisitions, Mr. Jobin said. And then he made his ultimatum.

“It was clear to us at this point that Glenn … wanted to have nothing to do with the business anymore,” the director said. “He wanted to pull the ripcord.”

Mr. Jobin is a former CEO of Canadian National Railway who also worked for Power Corp. He said while some boards might defer to a CEO with long-standing stakeholder relations like Mr. Chamandy, this board felt it had to push back because it saw the acquisitions as “very high risk” takeovers that required a lot more analysis if it were to consider them.

“It’s a lot easier for a board to kind of let it ride and wait until the CEO sort of falls in the trap of destroying value, right?” he said. “We were adamant that we had a responsibility because pushing for the inorganic growth on the basis of what was presented to us was reckless. Simply reckless.”

Mr. Jobin said Mr. Chamandy has sold most of his shares in the company.

“His end game was remaining the CEO at Gildan,” Mr. Jobin added. “Whether he truly or not believed in the acquisitions, I can’t tell you.”