Gildan hits out at activist investor as boardroom fight simmers

Clothing maker Gildan Activewear Inc. accused one of its largest shareholders of breaking US regulations when it accumulated a 5% stake as part of its campaign to replace the board and rehire its former chief executive officer.

Gildan, which owns the American Apparel casual clothing line, has been engulfed in a boardroom power struggle since announcing the dismissal of longtime CEO Glenn Chamandy on Dec. 11. Investment firms holding about a third of the shares have publicly opposed Chamandy’s removal, and some are backing an effort to elect new directors.

The dissident investor group is led by Browning West LP. But Gildan said Sunday the investment firm violated US rules when it acquired a large share position while failing to notify certain regulators — including the US Federal Trade Commission — of its intention to do so and complying with a 30-day waiting period. 

“Browning West’s rapid and illegal share acquisitions were undertaken as a necessary part of its scheme to take control of the company and its board and reinstall Mr. Chamandy,” Gildan said in a statement that accused the firm of being offside the Hart-Scott-Rodino Antitrust Improvements Act. 

Browning West said the allegation that it breached the law is based on a “false premise.” 

“It is obvious that Browning West poses no substantive antitrust concerns to any concerned authority,” the firm said in a statement. 

The events underscore the rising hostility of the fight for control at Montreal-based Gildan, which has a stock market value of C$7.3 billion ($5.4 billion). 

Under Canadian corporate law, an investor who owns 5% of a company can try to force a meeting of shareholders. That’s what Browning did on Jan. 9, receiving support from other shareholders such as Jarislowsky Fraser and Janus Henderson. It has proposed eight new board members, to be led by United Rentals Inc. Chair Michael Kneeland. 

The company hasn’t yet disclosed a formal response to the request for a shareholder meeting. 

Gildan said it intends to explore “all avenues” to ensure its shareholders’ protection, “potentially including notifications to applicable regulators and legal proceedings in the United States and Canada” of Browning’s alleged violations. 

The ongoing fight is a “significant distraction for management, potentially stalling strategic projects and major capital expansion, and creates uncertainty for shareholders,” Stifel Financial analyst Martin Landry said in a note to clients.