Dive Brief:
- Two independent proxy advisory firms are supporting activist investor Browning West’s slate of board candidates for Gildan Activewear, according to a Friday press release. The move comes after a months-long proxy battle following the December 2023 dismissal of Gildan’s former CEO.
- The support of proxy advisory firms ISS and Glass Lewis makes it appear “very likely that the activists will win the proxy battle,” David Swartz, senior equity analyst for Morningstar Research Services, said in an email to Fashion Dive.
- Also last week, Browning West announced that two Canada courts had dismissed legal complaints Gildan had filed against it. Gildan filed these complaints in an effort to block a shareholder special meeting.
Dive Insight:
Gildan’s annual meeting is scheduled for May 28. Last month, Gildan replaced five independent directors on its board as part of a strategy to support new CEO Vince Tyra. It also recommended two of Browning West’s board nominees.
In Friday’s announcement, ISS recommended that Gildan shareholders vote for all eight of Browning West’s nominees and recommended that shareholders withhold support for Gildan’s nominees.
ISS called Browning West’s move to reinstate former CEO Glenn Chamandy compelling and noted that Chamandy had a “strong record and proven ability to execute the plan.” ISS further stated that it supported “the experience of the dissident slate, and the belief the dissident slate will better manage succession planning compared to the legacy board.”
Glass Lewis, the second proxy advisory firm, affirmed this, per another statement. The firm said it was “struck by the number of large, long-term shareholders that have come out against the incumbent board.”
“For institutional and retail investors who were on the fence, the support of the proxy advisory firms will probably convince them to vote against the existing board,” Swartz said. “Browning West had a good chance of winning anyway since several major institutional shareholders have publicly backed them.”
In the weeks following Chamandy’s dismissal, multiple shareholders including Jarislowsky Fraser, Pzena Investment Management, Anson Funds Management and Turtle Creek Asset Management called to reinstate Chamandy.
Gildan didn’t immediately respond to Fashion Dive’s request for comment. Chamandy has declined to be interviewed.
Meanwhile, in its lawsuit announced in January, Gildan accused Browning West of violating the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, saying Browning West accumulated shares of Gildan unlawfully as a basis for this requisition.
The Superior Court of Quebec dismissed this allegation, per Browning West. Gildan brought another request to the Quebec Financial Markets Administrative Tribunal, “which sought various orders regarding Browning West’s solicitation of proxies, including an order to prohibit Peter Lee [of Browning West] from standing for election as a director of Gildan.” This request was also dismissed, per Browning West.
Browning West has also filed a legal complaint against Gildan, in which it accused the company of acting “in a manner that is oppressive, unfairly prejudicial to,” the shareholder group. Browning West’s press releases didn’t mention the status of this case, and a Browning West spokesperson didn’t immediately respond to Fashion Dive’s request for comment.
Meanwhile, Gildan is considering a sale of the company. It didn’t, however, mention the status of the bidding process in its investor presentation.
