Gildan Activewear Inc.’s board has put the clothing manufacturer up for sale and private equity funds are circling, escalating a three-month battle for control of one of the country’s largest consumer product companies.
Within the past two months, Montreal-based Gildan has received a takeover approach from a potential buyer and responded by giving investment banks RBC Capital Markets and Goldman Sachs Group Inc. a mandate to look for additional bidders, according to two sources. The Globe and Mail is not naming the sources because they are not permitted to speak publicly on the matter.
Gildan confirmed on Tuesday that the company is open to a takeover. The board formed a special committee that decided it was “in the best interests of Gildan to contact other potential bidders with a view to maximizing the value of any potential transaction,” company spokesperson Simon Beauchemin said in a statement.
“Several of these counterparties expressed an interest in considering a potential friendly transaction with Gildan,” Mr. Beauchemin added. “There can be no assurance any transaction will result from these discussions, and Gildan will continue to provide updates as appropriate.”
The Gildan board has hired investment bank Canaccord Genuity Group Inc. to advise an independent committee of directors on whether any bid represents fair value for shareholders, the sources said.
Gildan currently has a US$5.7-billion market capitalization. One of the sources said a potential buyer would likely need to pay more than US$7-billion, or more than US$42 per share, to acquire the company and take it private.
What’s happening at Gildan? A timeline of the months-long CEO corporate battle
Early Tuesday, Gildan shares were trading for about US$34 on the New York Stock Exchange. Later in the day, trading was briefly halted after the publication of a Globe and Mail article on the potential sale. When trading resumed, Gildan’s stock price jumped by 10 per cent, to close above US$37.
At least three U.S. private equity funds are each currently trying to raise up to US$5-billion in debt from banks and bond markets to fund a Gildan takeover, according to the sources, as well as documents that would-be bidders are sending to banks as they attempt to line up loans. Those documents were obtained by The Globe.
Potential bidders for Gildan include Boston-based Bain Capital, which has made a number of successful investments in Canadian consumer product companies, and Sycamore Partners, a New York-based private equity fund that specializes in retail and consumer businesses, the sources said. In 2023, Sycamore acquired 450 Rona stores in Canada when Rona’s U.S. parent, Lowe’s, decided to exit the market. Bain previously backed a successful sports apparel buyout by Gildan’s newly appointed chief executive officer, Vince Tyra. Bain also owned a stake in Dollarama Inc., and still owns part of Ski-Doo and Sea-Doo maker BRP Inc.
The start of the sale process follows a bitter leadership battle that began in December, when Gildan’s board dismissed company co-founder Glenn Chamandy from his position as CEO, over succession and strategic issues. The board replaced Mr. Chamandy with Mr. Tyra, a former Fruit of the Loom executive.
In response, at least nine Gildan institutional shareholders, which together own more than a third of the company’s stock, launched campaigns to reinstate Mr. Chamandy as CEO and replace some members of the board.
Gildan shareholders are scheduled to vote on the company’s leadership at the company’s annual meeting on May 28.
Private equity funds see the potential to increase Gildan’s sales and cash flow by shifting the company’s focus away from low-profit-margin products, such as socks and underwear, to high-margin clothing, such as fleeces and printed T-shirts, according to the documents from potential bidders.
Potential buyers also see a chance to increase Gildan’s sales and profitability by acquiring smaller rivals, according to the documents. Mr. Chamandy was likewise advocating for growth through acquisition prior to leaving the company in December.
The private equity funds project that Gildan’s potential market for sports clothing will expand from US$10-billion to US$13-billion over the next five years, as consumers continue to embrace casual dress. The fund managers project Gildan’s earnings before interest, taxes, depreciation and amortization (EBITDA), a key metric in buyouts involving debt and increased interest payments, will rise from US$750-million in 2023 to US$1.1-billion in 2028, while sales will climb from US$3.2-billion last year to US$5-billion in 2028.
Gildan has 44 factories, including newly built facilities in Bangladesh and Honduras. Private equity fund managers say in their pitches to banks that Gildan, as a low-cost producer in the industry, has an opportunity to win domestic and international market share from rivals such as Hanesbrands Inc., a public company with a US$1.9-billion capitalization, and Fruit of the Loom, which is owned by Berkshire Hathaway Inc.
On Tuesday, two officials at investment funds with stakes in Gildan said it would take a bid worth US$50 a share or more for them to support a takeover. The Globe isn’t naming the officials because they weren’t authorized to speak publicly.
Andrew Willis
Nicolas Van Praet