In the latest update in the Gildan Activewear saga, Gildan’s board of directors has called an annual and special meeting of its shareholders — set for May 28 — after facing pressure from shareholders. Browning West, LP, and its affiliates requested the special meeting to challenge and reverse the board’s decision to remove Glenn Chamandy as CEO.

According to a Gildan press release, Browning West asks that Gildan shareholders vote to remove five incumbent directors and replace them with five of Browning West’s eight nominees.

The Requisition

Once the board received the meeting request, it brought a committee of directors together, consisting mainly of directors not targeted by Browning West’s call for removal. The committee reviewed and made recommendations to the board concerning the requisition after receiving advice from advisors and meetings to consider shareholder, management, and advisor input. It then provided its recommendation to the board, and it was unanimously accepted.

The committee weighed several considerations in its decision, including:

  • the request of Browning West that the meeting be held as soon as possible and its fears the meeting would be delayed to the fall
  • statements made by shareholders expressing support for a meeting to be held in the spring and a desire to limit the disruption to the business
  • combining the annual and special meetings to avoid multiple meetings addressing similar issues and eliminating the potential for shareholder confusion and disengagement
  • the importance of providing all shareholders with adequate time to evaluate Browning West’s proposal and understand its proposed plan for Gildan
  • the opportunity for shareholders to assess CEO Vince Tyra’s leadership of the company

Gildan Looking for Speedy Resolution

“Shareholders will receive details about the matters to be presented at the meeting and about how to vote in a management information circular to be delivered to them in advance of the meeting,” Gildan states. “Over the last few weeks, the company has heard from numerous shareholders, both those who have indicated preliminary support for Browning West and those who have not. The board and shareholders are aligned in the view that a speedy resolution of this unnecessary proxy contest is in the best interests of the company and its shareholder owners.”

Gildan also agrees with shareholders who hold the view that a meeting is not required to resolve this matter. For that reason, Gildan has given Browning West the chance to meet with CEO Vince Tyra and requested to meet with Browning West’s nominees to better understand their views. According to Gildan, while Browning West has declined to engage with the board, it will still offer Browning West the opportunity to meet with Tyra. Gildan says it remains ready and willing to engage with Browning West and other shareholders who are in disagreement, to lay out a resolution that benefits all shareholders.

Violation of the HSR Act

As announced on Jan. 21, Gildan learned that Browning West accumulated shares of Gildan in violation of the HSR Act. The HSR Act’s requirements say that “any purchaser of voting securities must make a filing with the U.S. Federal Trade Commission and Department of Justice and comply with a 30-day waiting period if the acquisition meets the statute’s thresholds and no exemptions apply.”

Gildan says filing is not dependent on whether the share acquisition is “part of a broader merger transaction or if it raises substantive antitrust concerns.” For the violation of the HSR Act, Gildan says Browning West would not have held enough shares to requisition a meeting under Canadian corporate law. Gildan says it remains “significantly concerned” that the basis for Browning West’s requisition, which it sought to use to take over the board, was “founded on an illegality.”

That said, on Jan. 29, Gildan said it would file an application to the Quebec Court for “declaratory judgment that the requisition is null and void and, as a result, the special meeting of shareholders is canceled.” Despite the concerns regarding the requisition’s validity, the board decided to call the meeting and seek “declaratory relief from the court on this matter.”