Gildan CEO pushed board to back deals, director says

The former chief executive officer of Gildan Activewear Inc. pushed the board to approve large acquisitions before he was shown the door, according to a director of the clothing manufacturer. 

The board of Gildan, which owns the American Apparel clothing brand, has been at the center of a power struggle since announcing last Monday that it was replacing longtime CEO Glenn Chamandy with a former Fruit of the Loom executive, Vincent Tyra. Several large investors have rallied to Chamandy’s side, denouncing the CEO change and calling for the 62-year-old’s reinstatement.  

Those investors don’t know that Chamandy gave the board an ultimatum that he would quit unless the board agreed to work toward an acquisition, Gildan Director Luc Jobin said in an interview Sunday. Jobin declined to name the potential target, but said it was outside of Gildan’s main focus on textile manufacturing and would have left the Canadian company with a significant increase in debt.  

“Back in October, we reviewed our longterm strategic plan. We were confronted with an inorganic strategy which the CEO brought forward and entailed multibillion dollar acquisitions outside of Gildan’s core of manufacturing,” Jobin said.  

“These acquisitions would have been highly dilutive to shareholders. They were very high risk. They needed a lot more work for the board to consider them seriously,” he said. When that message was delivered to Chamandy, the relationship between the CEO and the board broke down, he said.  

Chamandy could not be immediately reached for comment. 

Gildan’s board has been under intense pressure since it surprised the market by announcing Chamandy’s departure, sending the stock plummeting. The company, which is based in Montreal, was founded by Chamandy’s family. 

Five investment firms — including Jarislowsky Fraser Ltd., Browning West LP and Pzena Investment Management Inc. — came out in opposition to the move, arguing that the board botched the succession process and Chamandy should be reinstated. 

Collectively, the firms hold about 25% of Gildan’s shares, putting the group in a strong position if they want to seek a shareholder meeting to change the board. 

In an effort to shore up its position, the board is giving a seat to one of its largest shareholders. 

Gildan said in a statement that Chris Shackelton, managing partner Coliseum Capital Management, is joining as a director. Coliseum is Gildan’s second-largest holder with 6.6% of the company, according to data compiled by Bloomberg, and it has agreed to vote those shares in support of Gildan’s board nominees over the next two years, according to a statement. Coliseum has also agreed to buy more shares, the statement said.