The institutional shareholder leading the battle to bring Gildan’s founder back at the helm of the Montreal clothing maker says the sale process launched by the company proves the need to reconstitute the board of directors.
“The current board of directors cannot under any circumstances be trusted to oversee a sale process,” declared the American investment firm Browning West the day after Gildan confirmed that talks were being held with potential buyers.
Gildan announced Tuesday that it had formed a special committee that made targeted contact with a small number of potential counterparties.
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.
Browning West, which owns an approximate 5% stake in Gildan, says it is concerned that the board has initiated a sale process to “avoid accountability, following continued and growing support for calls of Browning West for a meaningful reconstitution of the council.”
“Since the beginning of our campaign, we have maintained that Gildan is a high quality company with significant latent earning capacity and strong potential for value creation under the right board and management,” Browning West said. .
The institutional investor adds that according to spontaneous comments received from other Gildan shareholders, they would be dismayed by the rumor of a price of US$42 per share indicated by a potential buyer, “which does not represent in makes no bonus.”
“To put this low price in context, if Glenn Chamandy had not been fired and the stock had simply moved in line with the most relevant index, it would be worth around US$42 per share today. The stock will rise to at least this level after our experienced and credible team is elected in May, and it could be worth multiples of this level over the long term. »
Browning West calls the sale process “reactionary” and says a significant reconstitution of the board of directors is necessary immediately, even before the annual meeting scheduled for May 28.
Browning West proposed this winter to elect eight new members to the board of directors at the shareholders’ meeting
The names of several potential buyers are circulating, such as, for example, that of the private investment firm Sycamore Partners and the American conglomerate Berkshire Hathaway which notably owns Fruit of the Loom.
The investment firm Clayton Dubilier & Rice, which owns the sportswear distributor S&S Activewear, could also be interested, according to analyst Martin Landry of the Stifel/GMP firm.
Analyst Vishal Shreedhar of National Bank Financial estimates that Gildan could be worth a price in the range of US$43 to US$50 (or Canadian $58 to $68) for a buyer.