Gildan accuses ex-CEO of close relationship with shareholders calling for his return

Rosa Saba, The Canadian Press

Gildan Activewear Inc. is escalating an ongoing public battle for control of the Montreal-based apparel company, accusing its recently terminated CEO of having inappropriately close relationships with some of the shareholders calling for his reinstatement.

Ex-CEO Glenn Chamandy failed to disclose that he invested in funds managed by an unnamed Gildan shareholder that is now calling for his return, the company said in a release Tuesday evening.

"Mr. Chamandy’s actions and lack of transparency with the board are further indication that new leadership was required at Gildan," the company said in the release.

Gildan said Chamandy also seems to have a closer relationship with U.S. investment firm Browning West than he does with other shareholders, resulting in special treatment.

Chamandy, who co-founded Gildan, was terminated on Dec. 10 after four decades at the company. He was replaced by Vince Tyra, who started the top job this week.

Chamandy did not immediately respond to a request for comment, but his email auto-reply referred to previous statements. He previously said he presented a comprehensive long-range plan in October showing Gildan's organic growth prospects for the next five years.

In the weeks after his departure became public on Dec. 11, several of Gildan's biggest shareholders, including Browning West, have called for Chamandy to be reinstated as CEO. Browning West is seeking a special meeting of shareholders to replace eight members of the Gildan board in order to bring Chamandy back.

Gildan describes Browning West in the release as an "activist hedge fund" leading an "aggressive and misleading campaign" to reinstall Chamandy as CEO.

Chamandy appears to have treated Browning West differently than Gildan's other shareholders, the company claims.

Around a week after Chamandy proposed a "high-risk acquisition plan" to the board and was "pressing them to retain him as CEO," he gave Browning West's co-founders and several of the firm's investors an exclusive visit to Gildan's Honduras manufacturing plant, the company said.

"The company has no record in recent history of any other Gildan shareholder and their own investors being hosted by the CEO to an exclusive visit to a Gildan facility," said Gildan, adding that Browning West appears to have been given a "vastly different view" on Gildan's potential future share price than what Chamandy told the board.

Browning West said it conducts site visits to gain a better understanding of its portfolio companies.

"As a result of our understanding of the operational complexity of Gildan’s manufacturing process, we know that Vincent Tyra – who lacks manufacturing experience and has a record of value destruction – is an extremely poor leadership choice," the investment firm said in a statement.

"It has likely become clear to all shareholders that the board is much more focused on self-preservation than accepting shareholders’ views and creating value.”

The firm owns a 5.02 per cent stake in Gildan as of Jan. 9, according to financial services firm Refinitiv. That's up from 3.9 per cent on Dec. 14, according to a Browning West press release that day.

Gildan's stock price currently sits at $42.25, down from $49.61 on the last trading day before the company announced Chamandy's departure.

Gildan has said it replaced Chamandy because he didn't have a credible long-term strategy for the company, and had lost the board's confidence in his ability to grow the organization.

The company provided fresh details in Tuesday's release, after accessing the former CEO's files and electronic information following his departure.

"In addition to rarely being in the office, holding few senior management meetings and never bothering to visit the Company’s newest manufacturing plant, Gildan has now learned that Mr. Chamandy sent on average no more than a handful of work emails a day and had few business-related meetings diarized on his calendar," the company said.

Gildan said that on Nov. 25, Chamandy sent the board a letter with an ultimatum to approve his "risky multibillion-dollar acquisition strategy" and succession plan. But the next day, before the board had responded, Chamandy began moving out of his office.

The company in its release also denied a recent claim by Browning West that the board intends to use "extreme delay tactics" by postponing its next annual meeting to as late as the fall of 2024.

With files from Tara Deschamps

This report by The Canadian Press was first published Jan. 16, 2024.

Related

• Vince Tyra moves up start date as CEO at Gildan after board request
  
• Fired Gildan CEO responds to board criticism in open letter
  
• Gildan board says fired CEO Chamandy was distracted by deals, golf resort
• 
  

Gildan Sweat Shop Success Story

Gildan profit soars

Profile

Gildan Activewear is a vertically-integrated marketer and manufacturer of premium quality branded basic apparel. The Company manufactures premium quality basic T-shirts, sport shirts and sweatshirts for sale in the wholesale imprinted sportswear market. The Company sells its products as blanks, which are ultimately decorated by screenprinters with designs and logos for sale to consumers. Gildan has announced plans to sell its products into the mass-market retail channel, in addition to the screenprint market. In conjunction with this strategy, Gildan is expanding its product-line to include underwear and athletic socks.

Gildan is North America's largest T-Shirt manufacturer, and it is Canadian.
After closing its yarn spining plant in Quebec and outsourcing the work offshore, Gildan exports its T-Shirt manufaturing to the Caribbean/Central American Free Trade Zones.

Moneysense.ca | Oct 1, 2004

Real Assets Investment Management Inc., an ethics-based investor, said Thursday it has sold its shares of Gildan Activewear over the T-shirt company's treatment of workers at a Honduras factory.

This year they agreed to re-hire fired union workers in their new factory operations in the Houndouras leading the Canadian Anti-Sweat Shop Activist group Maquila Solidarity Network to suspend their campaign against Gildan.

Gildan then launched a massive new advertising and promotional camapaign for its products helping it push up its sceond, third and fourth quarter profits. Coincidence I think NOT. No word on what happened to the workers in Quebec who lost their jobs at Gildan. No compensation just the unemployment centre for them.

And while the Anti-Sweat Shop campaigners have been satisfied with their sop from Gildan, the Anti-War movement has not. They have focused on Gildan's sweat shop operations taking advantage of the current Canadian/UN occupation of Haiti in the name of Empire.

Building an Antiwar Movement in Canada

The single biggest impediment to getting people mobilized around war and occupation issues is the widespread perception that Canada’s hands are clean in the world; that unseemly regime changes are things carried out by George W. Bush and that at worst we are benevolent bystanders or well-meaning peacekeepers coming in after the fact.

Perhaps one under-utilized way to get around this pervasive myth is to highlight the blatant war profiteering of massive Canadian corporations. While the sordid operations of the likes of Exxon and Halliburton are internationally known, equally rapacious war companies based north of the 49th parallel are getting away with scant attention. The two that stand out are Gildan Activewear and SNC-Lavalin.

Gildan Activewear is a massive garment manufacturer, controlling 40% of the North American t-shirt market. Following the coup against Aristide, and the de facto government’s decision to overturn minimum wage increases brought in by the Lavalas Party government, Gildan announced that it would be moving some operations from Honduras to Haiti. The company is currently engaged in a massive publicity campaign, with ads on hundreds of bus shelters in Vancouver proclaiming the sweatshop label ‘A part of your life’. It has been speculated that they are building their public profile with an eye to winning the Vancouver 2010 Olympics clothing contract. The cases of Gildan and SNC are not unique in terms of Canadian corporations, but only two of the most blatant examples that belie the quaint notion of a harmless, innocent big business community, and the related myth of a political policy pursuing lofty, disinterested ‘humanitarian’ objectives.

Again Liberal trade policies are a direct cause of the offshoring of Quebecs clothing industry and Gildans success. And with Gildan they are further compounded by the companies involvement with the Canadian Occupation of Haiti. Welcome to the world of global capitalism.

This is a report from Haiti about Gildan detailing the union busting anti worker situation currently occuring in the offshore garment industry in that country. I have to ask MSN why it has been sucked in by Gildan and halted its information and pressure campaign for the rights of Gildan workers? Simply because the company has ameliorated the conditions of some of its workers at the expense of others? This seems to be the case.

"Excerpts from Batay Ouvriye News Bulletin No. 2, originally published in Creole circa September/October 2005

At the GILDAN factory in Tabarre, five workers were fired without reason. But on closer scrutiny, we note that these are the workers who played a role in fighting for the factory to pay transportation to and from the factory (which is actually stipulated in the Labor Code!). At first, Richard Coles, a close Aristide ally, was the main production responsible for Gildan in the country. But Coles lost the contract and Apaid is the one who came to play this role. Presently, several bourgeois in the assembly industry are producing for Gildan. All use the module production to exploit the workers, as described above, with repressive control embedded in the production structure itself… Gildan, however, is the most sadistic exploiter of the module production systems. That’s why struggle at Gildan is a concentration amongst others that has great importance presently.

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

Gillian Tan, Mathieu Dion and Derek Decloet, Bloomberg News

GILDAN ACTIVEWEAR INC (GIL:CT)

51.11 0.09 (0.18%)

As of: 03/21/24 9:37:58 am
REAL-TIME QUOTE. Prices update every five seconds for TSX-listed stocks

Chart Type - 1year

See Full Stock Page »

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

Jordan Fleguel, 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.”

Related

• Browning West sues Gildan over annual meeting
  
• Gildan's new CEO attempts to soothe shareholders amid higher Q4 profit, dividend hike
  
• Gildan accuses ex-CEO of close relationship with shareholders calling for his return
  

Gildan Sweat Wear

As I have reported Gildan Active Wear, North America's largest T-Shirt manufacturer , based in Quebec, has spent the last few years moving its operations to Occupied Haiti under the protection of Canadian/American/French and UN forces.

This week ,despite a two year tax break for manufacturers from the Conservative government, Gildan announced it is moving more of its operations to Haiti, Nicaragua and the Honduras. In fact the irony here is that because of NAFTA this move will mean that the largest impact of plant closings will be felt by Mexico.

Approximately 465 employees in Canada and the U.S. and 1,365 employees in Mexico will be affected by the manufacturing restructuring. The Company will make every effort to alleviate the impact of the closures on all of its employees in all of the communities affected. In addition, the Company will work closely with the Fair Labor Association and both North American and Mexican NGO’s to ensure that best practices are followed in managing the closure of its Mexican sewing operations. Gildan recognizes that the employees in the operations which are being closed have contributed significantly to the Company’s growth and success in recent years, and regrets that the relocation of its production capacity to its offshore manufacturing hubs is unavoidable in order to be globally cost-competitive in the intensely competitive North American apparel industry.

The demand of Fair Labour Practices and unionization campaigns for worker justice have made Mexico less attractive than Haiti where such practices are non existent. And the newly emerging Maquiladora's, Free Trade Zones, in the Honduras and Nicaragua are still relatively union free, meaning that the Fair Labour Standards are toothless. And even when there are unions Gildan subcontractors still violate their rights.

Five fired union leaders from the Nicotex factory in Sébaco, Nicaragua, a supplier of Gildan Activewear (t-shirts etc) have been reinstated at the factory following strong union action and an international campaign which followed their sackings in November 2004. NSCAG took part in this campaign.

But the crocodile tears shed by Gildan over it's need to move, are a bit much. As their bottom line shows, they have made mucho dinero over the last four years as they off shored more of their operations.

FISCAL
(in millions of $)
Sales

2006 $773.2
2005 $653.9
2004 $533.4
2003 $431.2
2002 $382.3
2001 $329.1

EBITDA
Earnings before interest, taxes, depreciation and amortization.
2006 $147.3
2005 $117.7
2004 $ 91.8
2003 $ 81.5
2002 $ 66.8
2001 $ 19.9

Net earnings
2006 $ 106.8
2005 $ 86.0
2004 $ 60.2
2003 $53.2
2002 $ 42.4
2001 $ 0.7

They are not being forced by globalization to do this, they are actively doing this in order to increase their bottom line.

And with the U.S. eliminating trade quotas on foreign-made socks as of January 1, 2006, Gildan is spending some $500 billion through 2010 partly to expand sock production facilities in Central America. Of two new Honduran factories, one will be able to make 20-million dozen pair a year making it the world's largest sock-making plant.

Resulting in the latest offshoring announcement from Gildan. One they have been planning for since last year.

``It's an indication that things are going very well for the company offshore,'' Jessy Hayem, an analyst with Desjardins Securities Inc. in Montreal. ``The extent of the savings is very positive news in terms of 2008. The $45 million figure seems very substantial,'' Hayem said.

By March 2008, Gildan will have spent about $400 million since 2002 to shift production to new plants primarily in Honduras and the Dominican Republic, Chief Financial Officer Laurence Sellyn said in a telephone interview.

And the plants they are closing in Canada are their only unionized facilities.

Gildan respects all laws, including those relating to freedom of association in Canada and elsewhere. Our internal Code of Conduct ensures the right to associate and it is furthermore a key element of WRAP and FLA's Codes of Conduct. In Canada, two of our plants are unionized.

The irony is that when Gildan went public it was supported by union dollars.

The Quebec Federation of Labour invested $6 million in Gildan in 1996

And while they give lip service to workers rights the reality is quite different. They fail to protect their workers abroad. Instead they avoid compliance with voluntary labour codes they agree too. When they finally do it is too late for the workers.

Final update report on gildan activewear honduras

To:
WRC Affiliate Colleges and Universities
From:
Scott Nova (WRC), Lynda Yanz (MSN), and Maritza Paredes (EMIH)
Date:
September 27, 2006

Re:
Update on Gildan Activewear (Honduras)
This memo is the second and final update on the verification of Gildan Activewear’s compliance with an agreement reached in January 2005 with the WRC and the Maquila Solidarity Network (MSN) aimed at remedying code of conduct violations related to a mass termination of workers that accompanied the closure of Gildan’s El Progreso facility in Honduras. Central to the agreement was Gildan’s commitment to providing priority hiring opportunities to former El Progreso workers.

The investigation found, in short, that Gildan did not comply with the agreement during a key early stage of implementation, though Gildan’s compliance with the accord improved in later stages and was accompanied by other constructive measures. Generally speaking, we must report that the agreement did not lead to substantial remediation of the wrongful terminations that the agreement was motivated to address. As discussed below, given the difficulties posed by the mass termination and the time that had elapsed between the closure and the agreement’s adoption, it is unlikely that the harm done to the workers involved would have been fully remediated even if the agreement had been fully adhered to.

Just like it is too late for their unionized workers in Canada. Despite the Conservatives corporate tax breaks and the Bloc's moaning and groaning about the harm this does to Quebec's textile industry.

Gildan is a capitalist success story. For Quebec, for Canada, the corporation Head Quarters and finances stay here while it ships production abroad. It is not a success for workers in North America, Mexico or at it's new sweat shops abroad.

While the Conservatives brag about closing loopholes for corporations using offshore tax havens, they have done nothing about Gildan offshoring production.


Also See:

Boom Times For Canadian Capitalism

Haiti Atrocities

Gilden

Find blog posts, photos, events and more off-site about:
TSX, NAFTA, Mexico, corporations, profits, Canada, Haiti, Honduras, Nicaragua, capitalism
GIL, Gildan, Gildan Active Wear, T-shirts,