Gildan dissidents reject swap of suits on board of clothing manufacturer

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The most vocal dissident investor in Gildan Activewear Inc. GIL-T rejected the clothing manufacturer’s plan to refresh its board of directors and claimed the move reflected a failed sales process at one of the country’s largest consumer product companies.

Hours after Gildan announced on Monday that it intends to replace seven of its 12 directors, including the board chair, activist investor Browning West dismissed the proposal. The Los Angeles-based fund manager, which owns a 5-per-cent stake in Gildan, said it remained committed to electing its own slate of eight board members and reinstalling co-founder and former chief executive officer Glenn Chamandy, who the board dismissed in December.

Gildan’s board intends to stick with CEO Vince Tyra, a former Fruit of the Loom executive who took the job in January. Shareholders are scheduled to vote on the competing slates of directors at the company’s annual meeting on May 28.

“The board’s list of failures grows by the week,” Browning West said in a statement. “The most glaring omission in the board’s latest manoeuvre is its failure to reinstate Glenn as CEO and its unwavering commitment to Vince Tyra.”

In the statement, Mr. Chamandy said: “The Browning West slate represents the best board for all Gildan stakeholders.”

With the planned departure of several Gildan directors, including outgoing chair Donald Berg, the boardroom battle comes down to a choice between Mr. Chamandy or Mr. Tyra as CEO of one of the world’s largest producers of T-shirts, socks and underwear.

Explainer: What’s happening at Gildan? A primer for the months-long CEO corporate battle

“What Gildan appears to be attempting here is dividing the opposition and separating the Chamandy die-hards from those who would prefer détente,” analysts at investment dealer Gordon Haskett Research Advisors said in a report. They said: “Given how this fight has unfolded so far, we’re guessing Browning West will respond by saying this move smacks of desperation and is insufficient.”

Montreal-based Gildan has an $8.2-billion market capitalization. Earlier this year, the board launched a sales process after receiving a takeover offer from an unidentified suitor. Three U.S. private-equity funds are among the potential buyers, according to analysts. Initial bids for the company were due on April 10.

On Monday, Browning West said the board’s decision to put forward new directors while Gildan is on the auction block shows the sales process has failed. In its statement, the fund manager said: ”We believe that today’s announcement was likely triggered by the collapse of the board’s reactive sale process.”

Gildan’s board said in a news release on Monday there continues to be “external interest in acquiring the company.” It said it expects to update shareholders on the sales process at the May 28 meeting.

Opinion: Why big investors want Gildan Activewear’s value to remain in public hands

Gildan is refreshing its board – new directors are scheduled to start May 1 – after extensive consultations with shareholders, incoming chair Tim Hodgson said in an interview. He said the new board members blend “historical continuity with fresh perspectives” and will work to ensure Gildan remains a leading global clothing manufacturer, based in Montreal.

Mr. Hodgson is the former CEO of Goldman Sachs Canada and chair of Hydro One Ltd., where he rebuilt the board and executive team after a showdown with the Ontario government, the utility’s controlling shareholder.

Prior to Monday’s announcement, three major Gildan investors had told The Globe and Mail they side with Browning West and support its eight nominees. They are Montreal-based investment management firm Jarislowsky Fraser Ltd. – owned by Bank of Nova Scotia – Philadelphia-based Cooke & Bieler LP; and Toronto’s Anson Funds. Janus Henderson Group, headquartered in London, also supports the expanded slate, according to information obtained by The Globe.

On Monday, spokespersons for Jarislowsky Fraser and Anson declined to comment on Gildan. In its release, Browning West said: “Contrary to the board’s false and misleading statements, support for Glenn and our full slate is growing and stronger than ever.”

In addition to Mr. Hodgson, Gildan’s incoming board members are Lee Bird, a former executive with Nike Inc. and the Gap; Jane Craighead, a former executive at Bank of Nova Scotia; Lynn Loewen, who previously led Minogue Medical as president; and Les Viner, the former managing partner at law firm Torys LLP.

Gildan’s board also recommended investors vote for two Browning West director candidates: Karen Stuckey, a former Walmart Inc. executive, and J.P. Towner, a former finance chief at Dollarama Inc. who now works for hardware retailer Rona Inc.