Faced with heavy pressure from activist investors, a big boardroom shake-up is underway at multibillion-dollar apparel maker Gildan (asi/56842).

The Top 40 promo products supplier announced Monday, April 22, that five current members of the board of directors, including Chair Donald Berg, will be departing the board on May 1 – to be replaced by five new leaders of the current board’s choosing.

Two additional current board members, Luc Jobin and Chris Shackleton, will not stand for re-election at the May 28 Gildan annual shareholders meeting.

The departing directors recommend that Jobin and Shackleton be replaced by Karen Stuckey and J.P. Towner – board candidates put forward by Browning West, a Los Angeles-based investment firm and Gildan investor that’s been spearheading a campaign to replace eight of the Montreal-headquartered firm’s board members with eight candidates of its selection.

In addition to Berg, the Gildan directors that plan to quit the board May 1 are Maryse Bertrand, Shirley Cunningham, Charles Herington and Craig Leavitt. The incoming board directors are slated to be Tim Hodgson, Lee Bird, Jane Craighead, Lynn Loewen and Les Viner. While appointed effective May 1, their long-term service is contingent on how shareholders vote to constitute the board of directors on May 28.

Hodgson has been tapped to be chair. His background is in asset management, finance and public service. He’s been special adviser to Governor Mark Carney at the Bank of Canada and served as CEO of Goldman Sachs Canada from 2005 to 2010, after having risen through various positions within the international investment bank’s New York, London, Silicon Valley and Toronto offices. He has more than 15 years of board experience spanning several sectors.

Notably, Hodgson and the four other directors joining the board May 1 support keeping Vince Tyra as Gildan’s chief executive officer. The board named Tyra to the CEO role after firing Gildan co-founder/longtime CEO Glenn Chamandy in December.

“I look forward to working with this highly qualified board and management team to realize the full benefits of Vince’s ambitious yet realistic plan to drive growth by enhancing the Gildan Sustainable Growth strategy,” said Hodgson. “The refreshed board and I fully believe in Vince and his talented team as well as Gildan’s leading market position and growth prospects.”

Said Tyra: “I am excited to lead Gildan forward with Tim and this world-class, reconstituted board, and look forward to leveraging their deep, varied expertise and strengths as we aim to build value together.”

Amid Corporate Fight, Gildan CEO Outlines Strategic Priorities https://t.co/qkcnfl0Xm3

— Chris Ruvo (@ChrisR_ASI) April 16, 2024

Chamandy’s firing touched off a corporate war that’s intensified in recent months.

Browning West, which holds about 5% of Gildan’s outstanding shares, has been leading a charge whose ultimate aim is to restore Chamandy as CEO and as a board director. The firm has been campaigning for shareholders to vote to appoint eight directors it has proposed to the board. Those directors, if elected, would put Chamandy back in the Gildan C-Suite.

Browning West criticized the latest moves from the Gildan board, particularly the decision to keep CEO Tyra, whom the investment firm has derided as an executive failure who’s destroyed value at companies in the past.

“Contrary to the board’s false and misleading statements, support for Glenn and our full slate (of board candidates) is growing and stronger than ever,” said Browning West principals Usman S. Nabi and Peter M. Lee. “We remain steadfast in our belief that the election of each of our eight highly qualified directors and Glenn’s return as CEO represent the best path forward for Gildan.”

Production Shift to Bangladesh in Board Candidates’ Plan to Up Gildan Earnings https://t.co/YtYtR90DFP

— Chris Ruvo (@ChrisR_ASI) April 1, 2024

Said Chamandy: “When I return to Gildan as CEO, I want to be supported by the highest quality board with relevant experience. I have spent time with members of the Browning West slate and believe they possess necessary track records of value creation, expertise in successful succession planning and corporate governance, and relevant operational, industry, and ESG experience.”

That slate of candidates Browning West is advancing has floated a growth plan that it believes will accelerate Gildan’s stock price from the current $35 or so to $100 within five years.

The Potential Sale of Gildan

Gildan’s board announced in March that it is considering proposals from buyers interested in acquiring the company. In its statement, Browning West indicated that this sales process had collapsed, adding that alleged failure “likely” triggered the just-announced boardroom changes.

The board had set April 10 as the deadline for receiving initial offers from interested acquirers, which have previously been identified as including private equity firms that own other Top 40 promotional products companies.

In a statement, the Gildan board said that “there continues to be external interest in acquiring the company and the process is ongoing.” However, the board stated, it will not make any announcements about the potential sales process before the May 28 shareholder meeting.

“We are confident that with the stability resulting from the resolution of the contested directors’ election issue at the annual meeting, the newly reconstituted board that we are recommending to our shareholders will, if elected, pursue their fiduciary duties by reviewing such external interest and assessing it against the company’s future plans,” directors said in a statement.

Based on estimated 2022 North American promotional product revenue of $762.2 million, Gildan ranked fifth on Counselor’s most recent list of the largest suppliers in the industry. Total global full-year sales across all of Gildan’s business divisions fell 1.4% year over year in 2023 to about $3.19 billion.