At the heart of the turmoil since December, the 15e major Quebec company on the stock market is now for sale. And the name of the conglomerate led by American investor Warren Buffett is already circulating as a possible suitor for Gildan.
After being contacted recently by an interested buyer, the board of directors of the Montreal clothing manufacturer formed a special committee which is currently discussing with potential buyers.
This development comes three months after the surprise firing of Gildan co-founder Glenn Chamandy, who had led the company for 20 years. His departure, justified by questions of succession and strategy, plunged Gildan into a power struggle between the board of directors and a group of institutional shareholders who disagreed with the dismissal of Glenn Chamandy.
A special Gildan committee made targeted contact with a small number of reputable potential counterparties, says Gildan spokesperson Simon Beauchemin.
“Several of these counterparties have expressed interest in considering an amicable transaction with Gildan,” he specifies.
Simon Beauchemin explains that it was in response to the receipt of a non-binding expression of interest in the acquisition of Gildan that the board established a special committee to study the merits of the proposal and any other transaction proposal, including maintaining the status quo and continuing to execute the existing business plan.
“After consulting with its legal and financial advisors and considering the interests of shareholders and other stakeholders, the Special Committee determined that it was consistent with its fiduciary duties and in the best interests of Gildan to communicate with d other potential initiators with a view to maximizing the value of any possible transaction. »
Simon Beauchemin mentions, however, that nothing can guarantee that an operation will result from these discussions.
“There are some who may have sensed an opportunity to make an acquisition to put an end to the tribulations,” comments the president of the Institute on Governance, François Dauphin.
“Except that the group of disgruntled shareholders claiming to control 35% of the shares holds more than the blocking minority. In theory, these shareholders have the ability to block a sale of the company if there ever needs to be a vote on a transaction,” he adds.
A potential buyer must therefore ensure that it obtains the support of at least one of the dissident institutional shareholders, underlines François Dauphin. “That’s the intriguing part of this story,” he said.
“Will those who were in favor of the return of Glenn Chamandy see an even more interesting opportunity with a buyer than simply with the return to office of the former CEO? It will take an offer on the table to be able to evaluate it clearly. »
The Los Angeles investment firm Browning West has been leading a cabal since December to reconstitute Gildan’s board of directors and bring back Glenn Chamandy. Browning West proposed this winter to elect eight new members to the board at the shareholders’ meeting scheduled for May 28.
The power struggle quickly took a bitter and vicious turn. This battle for control of Gildan has given way to accusations of peddling misleading information, using intimidation tactics, acting desperately and erratically, etc.
The board dismissed Glenn Chamandy, justifying the decision with differences related to the succession plan and emphasizing that Glenn Chamandy wanted to move forward with a risky multi-billion dollar acquisition strategy.
The possibility of Gildan becoming an acquisition target could be anticipated. Word has been circulating for a while that this could even be part of a council strategy to try to calm things down.
There were already whispers in December that a private investment firm might be interested in the company, notably because it generates good cash flow, and that foreign manufacturing companies (Chinese and Mexican, for example) might want to acquire a manufacturing base like that of Gildan.
If a private investment firm can find its account with Gildan due in particular to the cash flows generated by the company, analyst George Doumet, of Scotia, believes that Warren Buffett’s conglomerate, Berkshire Hathaway, could also interested in Gildan.
In a note sent to his clients late Tuesday, he recalled that Fruit of the Loom is a subsidiary of Berkshire Hathaway. A major company in the clothing sector, Fruit of the Loom is also a former employer of the current CEO of Gildan, Vince Tyra.
It was not immediately possible to obtain reactions from the nine known dissident institutional shareholders.
With a market capitalization of $8 billion, Gildan is the 15the largest public company in Quebec.
The story so far
Gildan’s board of directors fired Glenn Chamandy, co-founder and CEO, on December 10.
Several Gildan institutional shareholders quickly opposed the board’s decision and demanded the return of Glenn Chamandy to his position.
On December 29, American institutional shareholder Browning West said it wanted to request a special meeting of shareholders to elect five new directors to the board of directors.
Several Gildan institutional shareholders publicly support the slate of directors proposed by Browning West.
At the end of January, Gildan sets May 28 as the date of the shareholders’ meeting.
In February, Browning West representatives spoke with new CEO Vince Tyra, but said they left the meeting with more questions than answers.
In March, the New York Post publishes a headline relating a past romance of the new CEO of Gildan Vince Tyra with an employee now occupying a management position at Gildan.
Gildan describes the report as Post of “reprehensible attack peddled by Browning West as part of an activism campaign supported by Glenn Chamandy”, which Browning West and Glenn Chamandy deny.