While defending for a month its decision to fire Gildan co-founder and CEO Glenn Chamandy, the board of directors of the Montreal clothing manufacturer is accusing a major dissident shareholder of violating American antitrust law, which this shareholder denies.
Gildan’s board of directors alleges that US hedge fund Browning West violated the US Hart-Scott-Rodino Act by accumulating blocks of Gildan shares over the past month so as to hold a sufficient stake to allow it to apply for the holding a special meeting of shareholders to vote for the return to office of Glenn Chamandy and to reconstitute the board of directors.
Under the Canadian Business Corporations Act, a shareholder can only request a special meeting if they own more than 5% of the shares of a company.
The US Hart-Scott-Rodino antitrust law requires an activist investor to notify the Federal Trade Commission and the US Department of Justice of its intentions, and to respect a 30-day waiting period before acquiring securities. with voting rights beyond a certain ownership threshold in order to give the authorities time to examine the file.
Browning West held 4.8% of Gildan’s shares when this American shareholder publicly opposed the dismissal of Glenn Chamandy four days earlier on December 14. This public declaration made Browning West an active or activist shareholder, and the hedge fund subsequently requested, on January 9, the holding, without delay, of a special meeting, specifying that it had increased its stake in Gildan to 5%. .
Gildan contends that Browning West has only just informed him that it will file a legally compliant document, “late and under protest to avoid liability for its failure to follow the law.”
By implying that its filing was made under protest, Browning West amplifies its errors and demonstrates its unwillingness to take responsibility for its actions and its lack of skill in waging a proxy battle.
The Gildan Board of Directors
“Without the shares acquired in violation of the law, Browning West would have no legal right to request a meeting,” the board added in a statement issued Sunday evening.
Browning West responds that the board is seeking to invalidate its request for a special meeting based on a false premise.
“It is apparent that Browning West does not pose any substantial antitrust concerns to any relevant authority. Therefore, this move only strengthens our case for removing a majority of directors,” Browning West said in a statement sent to The Press in the evening on Sunday.
Browning West adds that the board is spending absurdly at the expense of shareholders by hiring several law firms, two investment banks, a public relations firm, a proxy solicitor and a private investigator.
Browning West also says it has received unsolicited reports that the board is trying to silence speaking out shareholders by sending them threatening legal letters.
The American shareholder claims that Gildan retained the services of its legal advisor, a “deplorable tactic that poses serious legal and ethical problems”. This investor says he is concerned that confidential Browning West information was shared with Gildan and its advisors and that the board’s conduct only validates his campaign.
Lawsuits?
The question now is whether Gildan will take legal action against Browning West or whether the company will instead decide to set a date for a special meeting or merge a special meeting with the annual general meeting of shareholders usually held in May each year. .
Analyst Martin Landry, of the firm Stifel/GMP, believes that the date of the extraordinary meeting could be set in several months rather than in the coming weeks. “This extended timeline should give new CEO Vince Tyra time to establish his plan and communicate it to investors, which could allow him to gain shareholder support along the way. »
According to this expert, the longer the extraordinary meeting takes to be held, the less chance Glenn Chamandy has of being reinstated in his functions.
Glenn Chamandy was removed as CEO on December 10. The board justified its decision by differences related to the succession plan and by emphasizing that Glenn Chamandy wanted to move forward with a risky multi-billion dollar acquisition strategy.
Around ten independent institutional shareholders, controlling approximately 35% of Gildan’s shares, have publicly expressed their opposition to the dismissal of Glenn Chamandy in recent weeks.