Special Meeting Would Empower Shareholders to
Improve Gildan’s Board by Voting to Replace Five Incumbent
Directors
Replacement Slate Includes Five High Quality
Director Candidates With Strong Track Records of Value Creation,
Expertise in Successful Succession Planning, and Relevant Industry
Experience
Urges Gildan’s Board to Refrain From Taking
Actions to Entrench Itself or Delay the Special Meeting
Browning West, LP (together with its affiliates, “Browning West”
or “we”) is a significant, long-term shareholder of Gildan
Activewear Inc. (NYSE: GIL) (TSX: GIL) (“Gildan” or the “Company”),
beneficially owning approximately 5.0% of the Company’s outstanding
shares.
Today, Browning West issued a letter to shareholders announcing
its intent to requisition a Special Meeting of Gildan Shareholders
(the “Special Meeting”) to provide shareholders an opportunity to
reconstitute Gildan’s Board of Directors (the “Board”) by removing
five incumbent directors and installing five highly qualified
individuals: Michael Kneeland, Glenn Chamandy, Peter Lee, Karen
Stuckey, and J.P. Towner. The proposed slate not only remedies the
Board’s mishandled CEO succession, but more importantly will
establish the highest quality governance in the Company’s history,
laying the foundation for the next chapter of value creation.
Browning West is introducing its proposed director candidates as
soon as they were confirmed to provide shareholders ample time to
review the strength of their professional backgrounds, track
records, and how their experience is both relevant and would be
additive to Gildan’s boardroom. Meanwhile, Browning West is
finalizing the technical details associated with the formal
requisition.
The full text of today’s letter is below.
***
December 29, 2023
Fellow Shareholders,
Browning West is a significant and long-term shareholder of
Gildan, with a beneficial ownership position of approximately 5.0%
of the Company’s outstanding shares. Over the past two weeks, we
have grown concerned with the Board’s unwillingness to effectively
remedy the broad and unprecedented shareholder opposition to its
recent actions. Since the Board terminated Gildan’s long-time CEO
and Co-Founder Glenn Chamandy without cause and announced the
appointment of Vincent Tyra as his replacement, the Company’s stock
has underperformed the most relevant index by 19%, implying more
than $1 billion USD of value destruction.1 What’s more, the Board
has ignored the independent feedback of nine separate investors who
collectively hold more than 35% of Gildan’s outstanding shares.
Each of these investors has publicly vocalized their concerns about
the Board’s handling of succession and called for the reinstatement
of Mr. Chamandy.
A critical mass of long-standing Gildan shareholders has clearly
lost confidence in the current Board due to its failure to carry
out its most fundamental responsibility: selecting and retaining
the best possible CEO. In light of the clear need for better
judgement and new perspectives in the boardroom, we intend to
requisition Gildan to convene a Special Meeting, where shareholders
could vote to:
- Remove five of the incumbent directors from Gildan’s Board;
and
- Appoint five highly qualified director candidates – Michael
Kneeland, Glenn Chamandy, Peter Lee, Karen Stuckey, and J.P. Towner
– to the Board.
We believe the Special Meeting will represent a referendum on
the Board’s actions and, if successful, the newly reconstituted
Board will have a mandate to immediately take the following
actions: (i) Appoint Mr. Kneeland as independent, non-executive
Chair, (ii) Terminate Mr. Tyra’s employment, and (iii) Appoint Mr.
Chamandy as CEO. We expect that Mr. Kneeland and the re-constituted
Board will reassess committee composition and reassign committee
chair roles.
The case for change in
Gildan’s boardroom is clear
Gildan’s Board has demonstrated it is unwilling to act in the
best interest of the Company and its shareholders. The incumbent
directors’ actions have destroyed value for Gildan shareholders and
introduced significant business risk, which we believe must be
immediately addressed through a reconstitution of the Board to
prevent further damage to Gildan’s business and its
stakeholders.
We believe the Board has made a series of value-destructive
decisions, which include:
- Abruptly terminating Mr. Chamandy as CEO without cause, despite
his track record of significant value creation evidenced by a 99x
total return for Gildan shareholders over the past 25 years;2
- Appointing Mr. Tyra as CEO, an individual with (i) a track
record of significant value destruction, (ii) a lack of
best-in-class experience in manufacturing and vertical integration,
and (iii) insufficient experience managing a large-scale, global
organization;
- Ignoring the feedback of nine shareholders, representing over
35% of the Company’s outstanding shares, who have each
independently and publicly voiced opposition to the Board’s CEO
succession decisions;
- Defending the Board’s CEO succession process with ever-evolving
and inconsistent explanations; and
- Cutting a “white squire” backroom deal with a lone shareholder
as an entrenchment tactic.
As a result of the
Board’s actions, we have assembled a well-rounded slate of five
highly qualified director candidates
The proposed nominees collectively have strong track records of
value creation, expertise in successful succession planning,
relevant industry and corporate governance experience, as well as
proven management and board service pedigrees in Canada and the
U.S. They are:
- Michael Kneeland (U.S. Citizen), Chair and Former Chief
Executive Officer of United Rentals, Inc. (NYSE: URI), is a
renowned leader with an exceptional record of value creation in a
large and operationally complex business, experience overseeing
successful CEO succession processes, and experience working with
founders of highly successful businesses. In our experience, the
most effective board Chairs are those individuals who have been
successful CEOs in their own executive careers. Former CEOs are
able to more effectively mentor current CEOs and their successors,
as opposed to those executives whose careers ended in a functional
or divisional role. His experience is highly relevant given the
recently mishandled CEO succession, which was overseen by the
current Board.
- Exceptional Record of Value Creation in a
Large and Operationally Complex Business: Mr. Kneeland
currently serves as the Chair of United Rentals, Inc. (“United
Rentals”), a $51 billion USD enterprise value equipment rental
business with over $14 billion USD of revenue and nearly $7 billion
USD of EBITDA.3 Mr. Kneeland became Chair in May 2019, following
his retirement as CEO. United Rentals stock has returned 17x or
nearly 19% annualized over the past 16 years, generating over $36
billion USD in value spanning Mr. Kneeland’s CEO and Chair tenure
at United Rentals from 2007 to today.4 Under Mr. Kneeland’s
leadership as CEO, United Rentals also invested over $10 billion
USD in net capital expenditures and nearly $8 billion USD in
acquisitions which drove significant value creation.5 United
Rentals’ revenue, EBITDA, and free cash flow per share grew 2.5x,
3.8x, and 9.5x, respectively, during his CEO tenure.6 During his
tenure as CEO and Chair, United Rentals’ operating margins improved
over 1,000 basis points to over 28%, which is well above the 18 to
20% operating margins shareholders expect from Gildan.7 Mr.
Kneeland’s leadership achievements are profiled in the book
“Lessons from the Titans,” which highlights his team’s operational
excellence, kaizen mentality, and investment discipline. These
skills are directly relevant to Gildan’s operations.
- Experience Leading Successful CEO
Succession Processes: When he was CEO, Mr. Kneeland
carefully developed internal succession candidates, and in 2019 he
successfully transitioned the United Rentals CEO role to COO
Matthew Flannery. Since Mr. Flannery became CEO, United Rentals’
stock has returned 4.4x, or 37% annualized, continuing Mr.
Kneeland’s strong track record of value creation.8
- Experience Working with Founders of
Successful Businesses: United Rentals was initially led by
its founders in the first six years of the company’s existence. Mr.
Kneeland had extensive experience working with these founders, who
remained on United Rentals’ board while Mr. Kneeland was in a
senior leadership position.
- Notable Leadership Roles: Mr.
Kneeland currently serves as Chair of Maxim Crane Works and as a
director on the board of American Tire Distributors, Inc. In 2015,
he was appointed to the National Advisory Board for the Johns
Hopkins Berman Institute of Bioethics.
- Glenn Chamandy (Canadian Citizen), Co-Founder and Former
Chief Executive Officer of Gildan, has a strong record of value
creation, an unrivaled understanding of Gildan’s low-cost
vertically integrated apparel manufacturing business model, and
experience leading a complex global business. His experience is
highly relevant given his role as Gildan’s CEO for almost 20
years.
- Strong Record of Value Creation:
Mr. Chamandy has over 40 years of experience leading Gildan, with
almost 20 years of experience serving as CEO. From 1998 to 2023,
Mr. Chamandy was responsible for delivering nearly 16% annual
growth in earnings-per-share. During this time, Gildan’s stock
returned 99x, or a nearly 20% annualized return, outperforming all
of Gildan’s competitors, many of which were forced to exit Gildan’s
market or were acquired by Gildan.9 Even through a challenging
economic environment, Mr. Chamandy enhanced market share and grew
EPS at Gildan by 54% in the past four years.10
- Unrivaled Understanding of Gildan’s
Low-Cost Vertically Integrated Apparel Manufacturing Business
Model: Mr. Chamandy devoted his entire career to building
Gildan into a low-cost, vertically integrated manufacturing
business, investing over $2 billion USD of capital expenditures
over the past 20 years.11 Much of Gildan’s success can be
attributed to the low-cost position, which Mr. Chamandy architected
and maintained for decades.
- Experience Leading a Complex Global
Business: Mr. Chamandy oversaw Gildan’s growth to over $3
billion USD of annual sales and over $700 million USD of EBITDA. He
led the expansion of Gildan’s operations into Central America and
Bangladesh.
- Notable Leadership Roles: In 2015,
Mr. Chamandy founded The Chamandy Foundation, a private family
foundation with a vision of improving the lives of the younger
generation, through funding areas such as health and wellness,
education, poverty, research, and the environment.
- Peter Lee (U.S. Citizen), Co-Founder and Partner of Browning
West, possesses extensive financial and capital allocation acumen,
experience leading public company CEO searches, and brings
substantial alignment with shareholders given that Browning West is
one of Gildan’s largest long-term shareholders. His experience is
highly relevant given the current Board has recently taken actions
that have destroyed substantial value for shareholders.
- Extensive Financial and Capital
Allocation Acumen and Prior Public Company Board Experience:
Mr. Lee is a Partner and Co-Founder of Browning West, where he
plays a leading role in investment research and capital allocation.
Mr. Lee previously served on the board of Countryside Partnerships
plc (“Countryside”), and he played a leading role in enabling the
merger of Countryside and Vistry Group plc to create the largest
homebuilder by volume in the U.K.12 Prior to joining Browning West,
Mr. Lee worked at Criterion Capital Management, Grey Mountain
Partners, and Lazard.
- Experience Leading Public Company CEO
Searches: The Partners of Browning West have co-led seven
CEO or Chair searches at public companies, including co-leading a
CEO search to resolve a weak succession plan at Countryside
Properties plc, where Mr. Lee served as a director. If appointed to
Gildan’s Board, Mr. Lee would harness all of Browning West’s
resources to assist Gildan with succession planning and other
matters.
- Strong Alignment with
Shareholders: If elected to the Board, Mr. Lee would bring a
shareholder perspective and strong alignment to the boardroom,
considering Browning West is one of Gildan’s top long-term
shareholders. Mr. Lee has been deeply involved in the firm’s
investment in Gildan, having conducted 46 meetings with senior
leadership and multiple visits to the Company’s manufacturing
sites.
- Karen Stuckey (U.S. Citizen), Former Senior Vice President
at Walmart Inc. (NYSE: WMT), has extensive experience in apparel,
led large-scale businesses with an international presence, and
operated within a low-cost business model. Her experience is highly
relevant given Gildan’s low-cost business model and the fact that
no current Gildan directors have mass market apparel
experience.
- Extensive Expertise in Apparel, Including
Private Label: Ms. Stuckey has nearly two decades of
experience as a senior leader at Walmart Inc. (“Walmart”), most
recently as Senior Vice President, Private Brand within the General
Merchandise segment. In this role, Ms. Stuckey led the development
of Walmart’s private label strategy across more than 100 verticals,
including apparel. It is noteworthy that she was responsible for
introducing Gildan private label products at Walmart. Ms. Stuckey
also served as President of the Casualwear Division of Hanesbrands
Inc. (NYSE: HBI) from 2000 to 2004, which was a competitor to
Gildan at the time.13 These experiences are highly relevant as she
can provide both a competitor’s and customer’s perspective on
Gildan and would be the first member of the Board with direct mass
market apparel product knowledge.
- Experience Operating Businesses of
Significant Scale: Ms. Stuckey oversaw a segment with over
$40 billion USD in annual revenues with full P&L responsibility
and led the development of strategy and operational execution.
Walmart operates more than 10,500 retail stores across 24 countries
and is the world’s largest private employer.
- Experience Operating Internationally with
a Global Supply Chain: Ms. Stuckey oversaw global operations
with a sourcing budget of over $20 billion USD and a supply chain
across multiple continents. Ms. Stuckey has direct experience
working in countries in which Gildan operates throughout Central
America and Asia.
- Operated Within a Low-Cost Business
Model: During a nearly two-decade career at Walmart, Ms.
Stuckey was steeped in a culture and operating model that
emphasized the importance of low-cost operations. The success of
Walmart’s low-cost model is widely considered one of the great case
studies in long-term value creation.
- J.P. Towner (Canadian Citizen), Former Chief Financial
Officer of Dollarama Inc. (TSX: DOL) and Current Chief Financial
Officer of RONA inc., has extensive experience working in low-cost
vertically integrated businesses focused on value-oriented consumer
products with successful founders and has a track record of
delivering strong financial results. His experience is highly
relevant given Gildan’s focus on vertical integration and
maintaining a low-cost advantage.
- Experience in Vertically Integrated
Businesses Focused on Value-Oriented Consumer Products: Mr.
Towner is the former Chief Financial Officer of Dollarama Inc.
(“Dollarama”), a $23 billion USD enterprise value vertically
integrated retailer focused on value-oriented products based in
Canada. Dollarama is vertically integrated through sourcing,
distribution, and retail and focuses on delivering the best value
to its customers in Canada, which is highly relevant to Gildan’s
own vertically integrated and low-cost business model. In addition
to its Canadian operations, Dollarama also operates a highly
successful multi-national strategy across four countries in Central
and South America. During Mr. Towner’s tenure, Dollarama’s revenue
grew at nearly 14% annually and earnings per share grew at nearly
25% annually. These strong operating results underpinned a total
return of 84% and an annualized return of 27% for Dollarama’s stock
during Mr. Towner’s tenure.14
- Track Record of Delivering Strong
Financial Results: Mr. Towner is a seasoned finance
executive with more than 15 years of experience in corporate and
financial strategy, capital markets, and risk management. As Chief
Financial Officer of Dollarama, Mr. Towner contributed to a highly
successful capital allocation strategy and returned significant
value to shareholders; in addition he was instrumental in improving
Dollarama’s EBITDA margins. He currently serves as the Chief
Financial Officer of RONA inc. (“RONA”), one of Canada's leading
home improvement retailers, currently owned by a private equity
firm. RONA generated over $5 billion USD in revenue in 2022,
operating or servicing 425 corporate and affiliated dealer stores
with a team of 22,000 employees.15 Mr. Towner also spent five years
as Executive Vice-President and Chief Financial Officer of
Pomerleau Inc. (“Pomerleau”), one of the largest construction
companies in Canada, which generated nearly $2.4 billion USD in
revenue in 2021.16 During his tenure, he contributed to increasing
the revenue and profitability of Pomerleau’s operations by 3x and
5x, respectively. Additionally, Mr. Towner spent nearly 10 years
with BMO Capital Markets.
- Experience Working with Founders of
Highly Successful Businesses: Mr. Towner has worked
extensively with independent board members and board committees of
public and private companies, as well as representatives from the
founding families of Dollarama and Pomerleau.
We have invested a great deal of time, energy, and resources to
present a thoughtful slate of proposed director nominees, who, if
elected, will ensure our collective interests as Gildan
shareholders are protected now and for the long-term. We will
strongly urge the Board to refrain from taking any near-term
actions to entrench itself and to call the Special Meeting as
expeditiously as possible once it has been requisitioned. Any
attempts to delay the Special Meeting will be a clear sign of
further entrenchment, continued disregard for shareholders, and
will increase the damage currently being inflicted on the Company
and its stakeholders. We will not hesitate to exercise all of our
rights as shareholders if the Board uses any further entrenchment
tactics.
Sincerely,
Usman S. Nabi
Peter M. Lee
***
No Solicitation
This press release is for informational purposes only and is not
a solicitation of proxies. If Browning West determines to solicit
proxies in respect of any meeting of shareholders of the Company
any such solicitation will be undertaken by way of an information
circular or as otherwise permitted by applicable Canadian corporate
and securities laws.
Disclaimer for Forward-Looking Information
Certain information in this news release may constitute
“forward-looking information” within the meaning of applicable
securities legislation. Forward-looking statements and information
generally can be identified by the use of forward-looking
terminology such as “outlook,” “objective,” “may,” “will,”
“expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,”
“plans,” “continue,” or similar expressions suggesting future
outcomes or events. Forward-looking information in this news
release may include, but is not limited to, statements of Browning
West regarding (i) how Browning West intends to exercise its legal
rights as a shareholder of the Company, and (ii) its plans to make
changes at the Board and management of the Company.
Although Browning West believes that the expectations reflected
in any such forward-looking information are reasonable, there can
be no assurance that such expectations will prove to be correct.
Such forward-looking statements are subject to risks and
uncertainties that may cause actual results, performance or
developments to differ materially from those contained in the
statements including, without limitation, the risks that (i) the
Company may use tactics to thwart the rights of Browning West as a
shareholder and (ii) the actions being proposed and the changes
being demanded by Browning West, may not take place for any reason
whatsoever. Except as required by law, Browning West does not
intend to update these forward-looking statements.
Advisors
Olshan Frome Wolosky LLP is serving as legal counsel, Goodmans
LLP is serving as Canadian legal counsel and Longacre Square
Partners is serving as strategic advisor to Browning West.
About Browning West, LP
Browning West is an independent investment partnership based in
Los Angeles, California. The partnership employs a concentrated,
long-term and fundamental approach to investing and focuses
primarily on investments in North America and Western Europe.
Browning West seeks to identify and invest in a limited number
of high-quality businesses and to hold these investments for
multiple years. Backed by a select group of leading foundations,
family offices, and university endowments, Browning West's unique
capital base allows it to focus on long-term value creation at its
portfolio companies.
1 Bloomberg market data as of December 28, 2023 and represents
total return relative to the Russell 2000 index since December 8,
2023. Loss in market value calculated as difference between Gildan
market capitalization assuming same performance as Russell 2000
since December 8, 2023 vs. Gildan actual return through December
28, 2023. 2 Bloomberg market data as of December 28, 2023 and
represents total return since June 17, 1998 IPO through December 8,
2023. 3 Bloomberg market data as of December 28, 2023. FY2023E
consensus revenue and EBITDA estimates for United Rentals. 4
Bloomberg. Represents total return and change in market
capitalization from June 4, 2007 to December 28, 2023. 5 United
Rentals Annual Reports & Quarterly Earnings Press Releases
(2007 – 2019). 6 United Rentals Annual Reports & Quarterly
Earnings Press Releases (2007 – 2019). Represents change in
revenue, EBITDA, and free cash flow per share from 2007 to 2019. 7
United Rentals Annual Reports & Quarterly Earnings Press
Releases (2007 – 2023). Margin expansion represents operating
margins from 2007 to 2023 based on Company EBITDA guidance and
Bloomberg consensus estimates for D&A as of December 28, 2023.
8 Bloomberg. United Rentals total return from May 8, 2019 to
December 28, 2023. 9 Bloomberg market data as of December 28, 2023
and represents total return since June 17, 1998 IPO through
December 8, 2023. Adjusted EPS CAGR measured from FY1998 through
FY2023 from Gildan Annual Report and Gildan FY2023 guidance. 10
Adjusted EPS CAGR measured from FY2019 to FY2023 based on Gildan
Annual Report and FY2023 Gildan guidance. 11 Gildan 2022 Investor
Day and 2022 Annual Report. 12 Vistry Group plc is projected to be
the largest U.K. homebuilder by volume in FY2024 based on Bloomberg
consensus estimates as of December 28, 2023. 13 Hanesbrands Inc.
was a division of Sara Lee Corporation during Ms. Stuckey’s tenure
prior to its spin-off in 2006. Prior to becoming President of the
Casualwear Division, Ms. Stuckey served as President of Just My
Size Company within Hanesbrands Inc. from 1997 to 2000. 14
Dollarama Annual and Quarterly Reports (FY2021 to October 2023
LTM). Dollarama total return from March 1, 2021 to September 12,
2023. 15 RONA website – “News” section. 16 Pomerleau 2021 Annual
Report. Assumes an average USD to CAD foreign exchange rate of
1.2535.
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Browning West info@browningwest.com 310-984-7600
Longacre Square Partners Charlotte Kiaie / Scott Deveau,
646-386-0091 browningwest@longacresquare.com
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