Activist investor slams Gildan's sale process
Browning West LP, the activist shareholder leading a campaign against Gildan Activewear Inc.'s board, is challenging the Canadian apparel maker's efforts to find a friendly buyer, saying the “reactionary” sale process may undervalue the company.
“We are naturally concerned that the board has initiated a sale process in order to avoid accountability after continuous and growing support for Browning West's calls for significant board reconstitution,” the Los Angeles-based investment firm said in a Wednesday statement. Browning West has proposed a slate of eight new directors, over the opposition of the current board. Shareholders are due to vote on May 28.
Gildan, the owner of the American Apparel brand, said Tuesday it received a non-binding expression of interest to be acquired. The board has struck a special committee to review the proposal while seeking other potential buyers for a “potential friendly transaction.”
The Montreal-based company has been embroiled in a hostile proxy fight with several shareholders since the board ousted chief executive Glenn Chamandy in December over disagreements about succession planning and a multibillion-dollar acquisition strategy. The dissident investor group, led by Browning, holds about a third of Gildan's shares and wants him reinstated as chief executive.
Browning West, which owns about five per cent of Gildan, said investors would be “dismayed” by a “rumoured” offer of US$42 a share for the clothing manufacturer, saying such an offer effectively represents no premium.
Gildan hasn't disclosed any terms from its potential buyer, and declined to comment on speculation of a US$42-a-share offer.
Gildan shareholders would probably require a “significant premium” given their long-term view, which would suggest an offer price of US$45 per share, Stifel Financial Corp. analyst Martin Landry wrote in a note to clients.
“We believe that some shareholders may be frustrated by this turn of events and may not support a takeover scenario at this point.”
In Canada, a proposed takeover normally requires the approval of two-thirds of the votes cast at a meeting of investors, according to Andrew MacDougall, a lawyer at Osler Hoskin & Harcourt LLP.
“If there is a 35 per cent block of dissidents, then either the transaction has to be sufficient to persuade the dissidents to support the transaction, or there is a very real risk that the transaction will not receive approval when it goes to a vote of shareholders,” MacDougall said in an interview.