SWEAT SHOP ECONOMICS
Investment firms see 'blood in the water' at Gildan: analyst
BNN Bloomberg
A market analyst believes investors may have seen “blood in the water” at Gildan Activewear and decided to take advantage with a push to buy the company.
On Tuesday, Gildan revealed it was exploring a possible sale as the company has embroiled in a tense dispute between its main shareholders over the dismissal of former CEO Glenn Chamandy. Now, sources told Bloomberg News that private equity firm Sycamore Partners is considering a bid for the clothing brand.
David Swartz, senior equity analyst at Morningstar Research Services, told BNN Bloomberg that companies may be looking to bounce on the company tumult.
“It appears that this was a completely unsolicited offer, there's no indication that Gildan's board was actually trying to sell the company until apparently, someone came forward with an offer, probably smelling blood in the water with all the controversy between the board and the shareholders,” he said in a television interview on Wednesday.
“It seems like Gildan's board had to do a pretty big shift there and decide whether to pursue this acquisition, and it seems like the prices that are being discussed are strong enough that the board really couldn't ignore the offer and now they're going to have to pursue it.”
Browning West, an investment firm with a roughly five per cent stake in Gildan that’s trying to reinstate Chamandy, said it was “naturally concerned” to hear of the news, and that the “current ‘lame duck’ board” is not equipped to evaluate any sale offers.
Browning West also mentioned a rumoured price of US$42 per share, saying shareholders should be “dismayed” but the offer.
Meanwhile, Swartz believes the rumoured price is a “strong offer” and should give Browning West reason for optimism.
“That's well above my fair value estimates for the company,” he said. “I value Gildan right now at only US$31, so a US$42 take-out price, I believe that would be the all-time high.”
“If that comes to pass, then I think that's a good outcome and I don't know what Browning West is now complaining about it.”
Given the challenges between shareholders and executives, Swartz believes a sale may be the best option for all sides.
“This could be probably the best scenario, the best way out of this mess, because right now the board and the shareholders, especially Browning West, are at a complete impasse, and there doesn't seem to be any room for negotiation,” he said.
“A sale of the company would at least end the whole controversy over who's going to control Gildan.”
Robert McFarlane, a corporate governance director and former CFO of Telus, told BNN Bloomberg that the latest developments at Gildan were not a surprise.
“This has played out exactly as I expected,” he said. “Browning West … they would expect this to have been a possible outcome as well. So it’s been the activists’ playbook if you will.”
McFarlane added that Gildan is right to do its due diligence on any serious offers.
“If they received unsolicited offers, they need to get advice, which they’re doing, evaluate those and decide whether it’s in the best interest of shareholders and other stakeholders,” he said.
With files from Bloomberg News
Sycamore Partners explores bid for apparel maker Gildan activewear
, Bloomberg News
GILDAN ACTIVEWEAR INC (GIL:CT)
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Private equity firm Sycamore Partners is exploring an offer for Gildan Activewear Inc., the Canadian clothing manufacturer that owns the American Apparel brand, people familiar with the matter said.
The New York-based buyout firm has discussed financing options with potential lenders, according to one of the people, who requested anonymity to discuss confidential information.
Montreal-based Gildan — which is in the middle of an ugly dispute between its board and some of its largest shareholders — confirmed Tuesday that it has received a “confidential non-binding expression of interest to acquire” the company, and has set up a board committee to review the proposal and any alternative transaction.
The committee and Gildan’s financial advisers contacted a small number of potential buyers, “several” of which have expressed interest in a friendly takeover, the company said, without naming them. Still, “there can be no assurance any transaction will result from these discussions.”
A representative for Sycamore declined to comment. The firm focuses on retail and consumer investments, and has done deals in Canada before, buying the Canadian retail business of Lowe’s Cos. for about US$400 million in a transaction announced in 2022.
Gildan has hired Goldman Sachs Group Inc., RBC Capital Markets and Canaccord Genuity Group Inc. to give advise, according to a person familiar with the matter.
Shares of Gildan surged 10.8 per cent in Toronto trading on Tuesday — giving the company a market value of about $8.6 billion (US$6.3 billion) — before trading was halted. The Globe & Mail was the first to report the interest from possible buyers.
Gildan’s board has been fighting with several institutional shareholders and former Chief Executive Officer Glenn Chamandy, who was sacked in December over disagreements about the company’s succession plan and strategy. The board hired Vince Tyra, a former Fruit of the Loom executive, to replace him.
The dissident group of investors, which holds more than one third of Gildan’s shares, is led by Los Angeles-based investment firm Browning West LP. The money manager is seeking to reinstate Chamandy by electing a new board at the company’s annual meeting on May 28.
Browning West is now suing the company and its board, accusing them of disregarding the rights and interests of shareholders.
Major Canadian Gildan shareholder weighs in on dramatic boardroom saga
, BNN Bloomberg
One of Gildan Activewear Inc.’s largest shareholders says the increasingly bitter feud between the company’s board of directors and its former CEO “never should have ended” in such dramatic fashion.
Evan J. Mancer, president and chief investment officer of Winnipeg-based Cardinal Capital Management, said his firm is one of a number of high-profile shareholders who would like to see Gildan’s ousted CEO and co-founder Glenn Chamandy reinstated.
“I'm not sure how they got to this… I think there's probably more ego involved than logic,” Mancer told BNN Bloomberg in a television interview Friday morning.
“I don't know who started it, between the board and (Chamandy); founders can be very passionate about their companies… but it never should have ended like this.”
Chamandy had served as head of the Montreal-based company for nearly 20 years before he was dismissed by Gildan’s board late last year and replaced by former Fruit of the Loom executive, Vince Tyra.
The board said at the time that they had lost faith in Chamandy’s ability to deliver long-term strategic objectives, but Chamandy maintains he was fired without cause, and said he had the backing of the company’s management team.
Mancer, whose firm is estimated to be Gildan’s twelfth largest shareholder, said he thinks Gildan was “extremely well managed” under Chamandy’s leadership, and that his past moves have set the company up for future success.
“It's extremely rare that a board would ever fire a successful CEO… even if there's some ego involved, at the end of the day, the job of the board is really to keep your successful CEO, not to let them go,” he said.
Activist investor Browning West
U.S. investment firm Browning West has been the most outspoken Gildan shareholder that wants to see Chamandy reinstated as CEO, and the firm has also said it will seek to replace eight of the 11 directors on Gildan’s board.
Browning West’s latest move came earlier this week when the firm filed a lawsuit against Gildan and its board to ensure it holds its scheduled annual meeting in May "without delay and with the oversight of an independent chair” in order to ensure a leadership vote is held.
Mancer said that while he initially only wanted Chamandy reinstated, he can’t see how he and the board that ousted him could work together again, and said that Browning West’s proposed change of directors is “probably the only solution.”
“I think Browning West actually did a really good job with this new slate of directors that they're proposing,” he added.
“They're all industry heavyweights for one, but also, there's two or three of them that have got a lot of experience with succession, having worked with founders in the past, and obviously having come through what we just came through, that's very much needed at Gildan.”
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