The transfer of power can begin at Gildan. The board of directors and CEO of the Montreal clothing manufacturer packed up Thursday evening, avoiding what was expected to be a humiliating defeat at the end of a proxy race.
Five months after being unexpectedly fired, Glenn Chamandy will be able to return to the position of CEO of the company of which he is the co-founder.
All members of Gildan’s board of directors are resigning, and CEO Vince Tyra left his position at the end of the day Thursday. The company also announced that it had ended discussions surrounding the previously announced sales process.
What is a proxy contest?
A proxy fight is when two or more groups of investors fight for control of a company by presenting candidates favorable to their respective cause for election as board members. To do this, they seek to convince a majority of shareholders to entrust them with their voting rights by signing a proxy.
“The shareholders have clearly expressed their position,” Gildan said, adding that the outgoing directors believe it was in the interest of all stakeholders that they resign and not seek renewal of their mandate at the meeting next Tuesday to allow the new board to take office and thus supervise the activities of the company in the most orderly and efficient manner possible.
The outgoing board appointed to the board of directors the candidates proposed by the American investment firm Browning West, this institutional shareholder who had led a cabal since December to overturn the dismissal of Glenn Chamandy.
PHOTO PATRICK SANFAÇON, LA PRESSE ARCHIVES
Glenn Chamandy
“The shareholders have spoken. Glenn Chamandy will make his return through the front door,” comments the president of the institute on governance, François Dauphin. “The number of proxies received should already confirm an unfavorable result for the candidates of the outgoing council,” he specifies.
This twist comes just days before what would have been the climax of one of the biggest proxy battles ever fought in Canada.
The board of directors of one of the largest companies in Quebec Inc. was confronted by several of its institutional shareholders who had been putting pressure on it for several months.
Browning West said Thursday that according to preliminary results, the overwhelming majority of rights attached to the shares were exercised in favor of its eight nominees before the board resigned.
Browning West’s eight director nominees will therefore make up Gildan’s new board of directors and will be the only director nominees standing for election at Tuesday’s annual meeting of shareholders.
Browning West never relaxed the pressure on the board of directors to convince as many shareholders as possible of the merits of its approach. The board had responded to every move, urging shareholders to support it until Thursday.
Dissident shareholders had received a major boost in the last few days. Three independent proxy advisory agencies (ISS, Glass Lewis and Egan-Jones) have in turn given their support to the list of candidates presented by Browning West.
The power struggle at Gildan quickly took a bitter and vicious turn after the board removed Glenn Chamandy two weeks before Christmas. 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.
This battle for control of Gildan has notably given way to accusations of peddling misleading information, insults and legal action.
Shareholders were bombarded with documents, with both sides throwing press releases, presentations and letters at each other, often responding within hours to new allegations.
The Caisse de dépôt et placement du Québec entered the saga this month by revealing its intention to invest 200 million in the company and thereby supporting the current board of directors of Gildan and the CEO Vince Tyra.
In March, Gildan management revealed it was in talks with potential buyers before letting it be known in April that there continued to be external interest in acquiring the company and that the process was continuing.
With a market capitalization greater than $8 billion, Gildan is one of the 20 largest public companies in Quebec.
Attention will quickly turn to Glenn Chamandy and his ability to implement the strategic plan presented by Browning West in recent weeks.
“The suspension of the sales process could weigh on investor sentiment, even if this has already been partially reflected in the share price,” says analyst Vishal Shreedhar of National Bank Financial. “The key question for Glenn Chamandy and Gildan will be to reinvigorate growth in an uncertain context,” he underlines in a note published Thursday evening.