June 12th, 2024

Proxy battle cost Gildan US$65M, as investors re-elect Chamandy, new slate to board

By Christopher Reynolds, The Canadian Press on May 28, 2024.

MONTREAL – The bitter battle over who would run Gildan Activewear Inc. cost the company at least US$65 million, according to its newly returned CEO.

“This is probably the largest proxy fight in history, even more so than Disney, for example, which is 40 times our size,” said chief executive Glenn Chamandy, referring to a high-profile struggle at the entertainment company in recent years..

Shareholders of the T-shirt maker voted to place Chamandy back on its board alongside a slate of candidates put forward by activist investors on Tuesday, capping a months-long leadership battle.

The election marks another vote of confidence for the company co-founder, who retook the helm last week after being ousted from the top job in December amid accusations he was no longer fit to lead the firm.

Chamandy told reporters in Montreal that Gildan’s conduct over the past several months showed “poor judgement,” causing a stressful period for him, his family and employees at the company.

“I was a little saddened, I would say, by the way I think the board handled the succession – and handled me personally,” he said.

Activist shareholders, including Browning West LP, pushed for Chamandy’s return to the apparel manufacturer for months after former Fruit of the Loom executive Vince Tyra took over Gildan’s CEO post. Gildan’s largest shareholder, Jarislowsky Fraser, supported Browning West.

In a shock move last week, Tyra and Gildan’s board stepped down, paving the way for Chamandy’s return and for Browning West’s slate of directors to be elected.

The US$65 million battle includes severances to outgoing board members and two executives, the company sale process – floated in March and since scrapped – as well as legal costs that include a pair of lawsuits launched by Gildan against Browning West, which were dismissed earlier this month, Chamandy said. That doesn’t include his own severance, which he said he never received.

“This board was very entrenched and I think was very abusive to shareholders’ money,” he said of the departing directors.

Roughly US$26 million of the US$65-million total went to Tyra, who headed the company for four months, and Arun Bajaj, Gildan’s former human resources chief, said Chamandy, who called the compensation to his predecessor “shocking.”

“They actually got the money for their severance and then left the company subsequently a couple days later, which is really strange,” he said. “From our view, it’s not very clean.”

Nonetheless, Chamandy suggested legal recourse is unlikely: “We’re putting this behind us.”

Meanwhile, the new board slate received “overwhelming support” from shareholders, the CEO said. The precise tally is expected by Wednesday morning.

Leading proxy firms Institutional Shareholder Services Inc., Glass Lewis and Egan Jones had all recommended Browning West’s group of candidates be elected.

Gildan had previously replaced five directors in April and said it would back two Browning West nominees.

Browning West co-founder Peter Lee said Tuesday the legal battles cost his firm “millions of dollars.” The Los Angeles-based hedge fund will determine “down the road” whether Gildan might cover some of that expense, he said.

“Overall, justice has prevailed,” Chamandy told reporters. “The shareholders have spoken. This is a new beginning for Gildan.”

However, questions have already arisen around succession plans, given the tortuous saga of the past half-year.

“I’ve got a lot of energy. I’m in my early 60s, which is early 50s in the future,” he said.

While Chamandy declined to speculate on when he might step down, chairman Michael Kneeland said, “Obviously, we’ll say three to five years – that’s probably good guardrails, but there’s no set time limit.”

Chamandy also threw cold water on the idea of a sale of the clothing maker, which the previous board announced barely two months ago. The chief executive pointed to Gildan’s ability as a publicly traded company to raise billions of dollars in capital for investment in garment factories.

“Private equity comes in and they buy the company and they put $5 billion of debt on the company, which is unmanageable,” he said. “We’re not going be able to reinvest in the company itself and we’ll lose our competitive advantage.”

This report by The Canadian Press was first published May 28, 2024.

Companies in this story: (TSX:GIL)

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