Gildan, Activist Investor Trade Punches Over Antitrust Claim (1)

Clothing maker Gildan Activewear Inc. accused one of its largest shareholders of breaking US regulations when it accumulated a 5% stake as part of its campaign to replace the board and rehire its former chief executive officer.

Gildan, which owns the American Apparel casual clothing line, has been engulfed in a boardroom power struggle since announcing the dismissal of longtime CEO Glenn Chamandy on Dec. 11. Investment firms holding about a third of the shares have publicly opposed Chamandy’s removal, and some are backing an effort to elect new directors.

The dissident investor group is led by Browning West LP. But Gildan said Sunday the investment firm violated US rules when it acquired a large share position while failing to notify certain regulators — including the US Federal Trade Commission — of its intention to do so and complying with a 30-day waiting period.

“Browning West’s rapid and illegal share acquisitions were undertaken as a necessary part of its scheme to take control of the company and its board and reinstall Mr. Chamandy,” Gildan said in a statement that accused the firm of being offside the Hart-Scott-Rodino Antitrust Improvements Act, also known as the HSR Act.

Browning West said the allegation that it breached the law is based on a “false premise.” “It is obvious that Browning West poses no substantive antitrust concerns to any concerned authority,” the firm said in a statement.

The investment firm’s position is that it is exempt from the HSR Act because it has a parent entity that’s not incorporated in the US and Gildan is based in Canada, according to a person familiar with the matter.

Shares of Gildan were up 1.1% in late morning trading in Toronto on Monday.

‘Significant Distraction’

The events underscore the rising hostility of the fight for control at Montreal-based Gildan, which has a stock market value of C$7.3 billion ($5.4 billion).

Under Canadian corporate law, an investor who owns 5% of a company can try to force a meeting of shareholders. That’s what Browning did on Jan. 9, receiving support from other shareholders such as Jarislowsky Fraser and Janus Henderson. It has proposed eight new board members, to be led by United Rentals Inc. Chair Michael Kneeland.

The company hasn’t yet disclosed a formal response to the request for a shareholder meeting.

Gildan said it intends to explore “all avenues” to ensure its shareholders’ protection, “potentially including notifications to applicable regulators and legal proceedings in the United States and Canada” of Browning’s alleged violations.

The ongoing fight is a “significant distraction for management, potentially stalling strategic projects and major capital expansion, and creates uncertainty for shareholders,” Stifel Financial analyst Martin Landry said in a note to clients.

(Updates with Browning West comment in sixth paragraph and share price)

To contact the reporter on this story:
Mathieu Dion in Montreal at mdion12@bloomberg.net

To contact the editors responsible for this story:
Derek Decloet at ddecloet@bloomberg.net

Phoebe Sedgman

© 2024 Bloomberg L.P. All rights reserved. Used with permission.