The board of Gildan Activewear Inc. GIL-T is pushing potential buyers of the clothing manufacturer to make their initial offers by April 10, as the company looks for alternatives to an activist investor campaign aimed at replacing its directors.
The board of Montreal-based Gildan put the company up for sale in February after receiving an unsolicited takeover approach. The expression of interest came after the board dismissed co-founder and chief executive officer Glenn Chamandy in December, kicking off a campaign led by fund manager Browning West to replace the board and reinstate Mr. Chamandy.
Gildan’s financial and legal advisers are now pushing potential bidders to make their initial offers by next Wednesday, according to two sources familiar with the process, as part of a strategy to give shareholders clarity on the sales process ahead of the company’s annual meeting, scheduled for May 28, where shareholders will vote on board members.
The Globe and Mail is not identifying the sources because they were not authorized to discuss the matter.
Takeovers traditionally play out over several months, with target companies and their advisers using the initial offers to narrow the list of potential buyers down to two or three bidders.
What’s happening at Gildan? A primer for the months-long CEO corporate battle
At least three U.S. private equity funds – Bain Capital, Sycamore Partners and Clayton Dubilier & Rice LLC – are circling Gildan, according to analysts. Gildan’s advisers are the investment banking units of Royal Bank of Canada and Goldman Sachs Group Inc. and law firm Norton Rose Fulbright Canada LLP. Canaccord Genuity Group Inc. is advising the special committee of Gildan’s board that will consider takeover offers.
Gildan is one of the country’s largest publicly traded consumer product companies, with an US$8.4-billion market capitalization.
Its board has been in a war of words with Browning West and several other institutional investors since December, with some fund managers arguing that its shares are undervalued and that the directors’ decision to put the company up for sale is driven by their fear of losing the proxy vote at the annual meeting.
On Monday, Browning West released its strategy for improving performance at Gildan, if its slate of directors is elected and 61-year-old Mr. Chamandy returns as CEO. The 57-page document says Gildan can boost its share price to US$60 in the short term and US$100 within five years by shifting more manufacturing to its newly built factories in Bangladesh, expanding international sales of T-shirts and fleece wear and taking on more debt to buy back shares.
On Wednesday, Gildan stock closed at US$36.79 on the New York Stock Exchange.
“There seems to be a consensus forming on how the operating path going forward should look like,” said analyst George Doumet at Bank of Nova Scotia in a report Monday. He said whoever ends up running Gildan will ”focus on being the lowest-cost operator; emphasis on organic growth through market share gains; margin improvement through mix and operating leverage and use leverage to magnify shareholder returns.”
Nicolas Van Praet
Andrew Willis