Gildan Activewear faces lawsuit from shareholder over claims of ‘oppressive actions’

A shareholder of Gildan Activewear has filed a lawsuit against the company claiming that it had pursued a “strategy of entrenchment, obfuscation and disparagement of dissenting shareholders” while making “value-destructive decisions”.

Browning West, which owns around 5 percent of Gildan’s outstanding shares, said it was filing the lawsuit with the Quebec Superior Court in a bid to ensure the rights of shareholders are preserved in connection with an upcoming Annual Meeting of Shareholders, to be held May 28.

According to the investment firm, Gildan allegedly attempted to justify its decision to terminate founder Glenn Chamandy, who was ousted last year, and appoint Vincent Tyra as CEO with a “misleading and evolving set of explanations that directly contradict signed statements” in prior annual reports.

Investors, one being Browning West, had previously requested for Gildan to reinstate Chamandy to the helm, a call that had ultimately been rejected by the apparel group which said that the founder had “worked to entrench himself” following the refusal of its plans to make “high-risk” acquisitions that would “shift Gildan away from its core area of manufacturing”.

Responding to Gildan’s decision, however, Chamandy said that he had given “no ultimatum to Gildan’s board with respect to any strategy or potential acquisitions”, alleging that the move was a “sideshow to distract from the reaction the shareholders have had with respect to the board’s handling of succession planning”.

Browning West also claimed that Gildan had leaked corporate documents and confidential information to journalists, “improperly” solicited proxies, acted to undermine and delay shareholders from exercising their rights and launched “unwarranted public attacks” on shareholders.

As such, the firm said it was concerned that Gildan would attempt to delay the imminent annual meeting, which it is requesting the court to uphold through the appointment of a third-party independent chair to oversee the process.

In a release, Browning West’s Usman Nabi and Peter Lee said: “Rather than assume accountability for its value-destructive decisions, we believe that the board continues to take oppressive actions against shareholders, demonstrating that its priority is self-preservation.”