With the request of a major shareholder of Gildan to hold a special meeting, the board of directors of the Montreal clothing manufacturer will have no other choice than to convene shareholders soon to have them vote on the return to office of the ex-CEO Glenn Chamandy and the election of directors.
At least that’s the opinion of analyst Martin Landry, from the firm Stifel/GMP.
American institutional shareholder Browning West announced on Tuesday that it is requesting the holding, without delay, of an extraordinary meeting of shareholders to reconstitute the majority of Gildan’s board of directors.
Martin Landry says he understands that the council has 21 days to respond and set the date of the meeting.
If the board does not call a special meeting, he believes Browning West could take Gildan to court to force a meeting.
“Case law suggests the odds are in Browning West’s favor. So there is a scenario that a special meeting could be called in the next three months,” he says.
If Gildan’s board of directors were to use tactics to delay holding a meeting, Gildan directors could lose investor confidence, according to Martin Landry.
Browning West claims to have learned that the board intends to employ extreme tactics by postponing the next annual meeting of shareholders and any requested special meetings until the fall.
Browning West also expresses concern that the board is moving forward the start date of Vince Tyra, Glenn Chamandy’s designated successor, and finds it troubling that the board is deliberately trying to diminish the company’s results and growth prospects.
It was not immediately possible to obtain a reaction from Gildan.
Glenn Chamandy was removed as CEO on December 10. 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.
Browning West has expanded its list of trustee candidates and is now seeking to replace 8 of 11 trustees. The desired departures are those of Donald Berg, Maryse Bertrand, Marc Caira, Shirley Cunningham, Charles Herington, Luc Jobin, Craig Leavitt and Chris Shackelton.
Browning West proposes to install on the board Glenn Chamandy, the former CEO of United Rentals, Michael Kneeland, a former Nike executive, Michener Chandlee, the finance chief of CN, Ghislain Houle, the former president of Mobilia , Mélanie Kau, Browning West co-founder Peter Lee, former Walmart executive Karen Stuckey and Rona CFO J.P. Towner.
For Browning West, which says it holds an approximate 5% stake in Gildan, holding a special meeting quickly is critical because with each passing day, the uncertainty risks causing permanent damage to Gildan’s stakeholders.
Martin Landry says this saga is unfortunately not beneficial for any of the stakeholders and that the allegations publicly revealed by the council and by Glenn Chamandy could leave scars that could take a long time to heal. “There will be a lot of explaining to do to restore investor confidence,” he says.
About ten institutional shareholders controlling approximately 35% of Gildan’s shares have publicly expressed their opposition to the dismissal of Glenn Chamandy for a month.
Without refuting the allegations made against him Monday in an open letter published by the council, Glenn Chamandy said he was disappointed and offended. The open letter noted that he was gradually stepping down as CEO, focusing more on his personal outside activities, including developing a golf resort in Barbados.
“I am deeply disappointed by the actions of the board,” he said in a public statement released Tuesday.
“I am offended by what appears to be a premeditated effort to publicly undermine my record and, what is even worse from a corporate perspective, is that the board’s negligent behavior also tarnishes the reputation of a big Society. »
Glenn Chamandy argues that the board’s “self-serving” motivations, designed to distract from its own imprudence, led it to lose sight of what was truly important: the best interests of the company, its employees, its customers and its shareholders.
“I find it particularly distressing that the board of directors decided to use confidential strategic information for nefarious purposes with the sole aim of entrenching its power, without regard for the impact on the value of the company. »
As of late Tuesday, Gildan stock was trading at $42.12 (0.12%).