Gildan board defends CEO’s termination in shareholder letter

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The Gildan Activewear Inc. chief executive shakeup escalated Tuesday with the board of directors defending and explaining their termination of Glenn Chamandy, while a top-five shareholder warned it may call for a special meeting to address the board’s governance.

Wednesday produced the latest round of in-fighting among several large Gildan shareholders over how Chamandy was dismissed, as well as the apparent coalescing of a coalition representing at least 33% of outstanding shares urging his return.

Gildan, based in Montreal, has more than 500 jobs at its yarn-production plant in Mocksville, as well as facilities in Rockingham and Rowan counties.

The board, led by chairman Donald Berg, took the unusual step of sending to all shareholders a letter that it said would “clarify the record as to why the directors of Gildan recently came to the unanimous decision.”

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The board said Dec. 11 that Chamandy had “left” the company and board member Craig Leavitt is serving as interim chief executive and president.

The letter was meant to “outline the path forward under Vince Tyra,” who is scheduled to take over as chief executive and president Feb. 12. Tyra is a former University of Louisville athletics director and Fruit of the Loom executive.

After praising Chamandy’s 20-year career with Gildan for “exceptional growth and value creation,” the board said that “over the last two years, the board’s trust and confidence in Mr. Chamandy eroded gradually as we worked to hold him accountable for delivering the next chapter of the company’s long-term growth strategy, as well as the development of his people.”

Since December 2021, the board and Chamandy, 61, had conversations addressing chief executive succession, but they dispute how the plan was to work and when it would take effect.

The board said it determined over the past two years that “the challenges and opportunities that lie ahead call for a new leader with new ideas and different skills,” which led members to select Tyra on Dec. 10.

The board claims Chamandy began to renege on his succession cooperation in October when he recommended potential acquisition initiatives. The board called them “high-risk and highly dilutive multi-billion-dollar acquisitions that would shift Gildan away from its core area of manufacturing experience.”

The board said Chamandy indicated that if it didn’t go along with his recommendations that he would step down and sell his shares in the company. As of the March 30 filing of its fiscal 2022 report, Chamandy held 3.42 million shares worth $93.65 million at that time.

“The board is disappointed in Mr. Chamandy’s attempts to inflict the maximum amount of disruption to Gildan’s business in order to remain as CEO,” according to the letter.

Chamandy denied in a statement Monday that 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,” Chamandy said. “I did not and could not orchestrate or control the events; the board conducted the process.”

The board also defended adding Chris Shackelton, co-founder and managing partner of Coliseum Capital Management, to the board as part of Coliseum making an undisclosed additional investment in Gildan. Coliseum holds the No. 2 ownership stake at 6.64% and had pledged to become its top shareholder.

The companies did not disclose the investment amount in what they identified as “a support agreement” through market purchases during insider open window periods.

Another key element is Coliseum pledging to support Gildan’s full state of board nominees at the 2024 and 2025 shareholder meetings.

Other shareholders

The Gildan board’s letter quickly prompted a response from at least two other top-five investor shareholders.

Browning West LP, an investment management firm, was the first investor group to oppose the board’s termination on Chamandy.

The firm said Wednesday it has raised its stake from 3.86% on Dec. 11 to 4.8% to accentuate both its belief in Gildan and its disappointment with the board’s actions.

Browning West calling for Chamandy’s immediate reinstatement, as is at least six other prominent shareholder groups.

It has been joined by Oakcliff Capital (0.4% stake) in wanting Berg to be dismissed. Browning West wants its co-founder Peter Lee appointed as a member.

“Browning West is fully prepared to requisition a special meeting of shareholders to hold the board accountable for its actions and prevent the further destruction of value,” the firm said.

“Shareholders will not tolerate the board doubling down on its poorly conceived succession and its backroom deal in exchange for an individual investor’s support.”

“With each passing day, the board’s apparent arrogance and indifference validate that substantial change is urgently needed in Gildan’s boardroom.”

Meanwhile, No. 1 shareholder Jarislowsky Fraser Ltd. at 7.23% continues to support reinstating Chamandy and opposes the addition of Coliseum Capital executive Stapleton to the board.

Jarislowsky called Stapleton’s appointment a “serious” governance concern considering Coliseum only became a prominent investor in 2022, according to a Globe & Mail article Tuesday.

rcraver@wsjournal.com

336-727-7376

@rcraverWSJ

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