Browning West Urges Gildan Activewear’s Board of Directors to Promptly Answer Questions Related to Apparent Diligence Failures During Its CEO Search
09 February 2024 - 6:30AM
Business Wire
Browning West, LP (together with its affiliates, “Browning West”
or “we”), which is a long-term shareholder of Gildan Activewear
Inc. (NYSE: GIL) (TSX: GIL) (“Gildan” or the “Company”) and
beneficially owns approximately 5.0% of the Company’s outstanding
shares, today urged the Company’s Board of Directors (the “Board”)
to promptly answer questions regarding its apparent diligence
failures during the process that led to Vincent Tyra’s appointment
as Chief Executive Officer (“CEO”).
As part of standard due diligence, Browning West conducts
thorough research pertaining to the track records of CEOs of our
portfolio companies. Our research related to Mr. Tyra has revealed
a clear track record of value destruction. Nonetheless, we met with
Mr. Tyra and Ms. Maryse Bertrand, Chair of the Corporate Governance
and Social Responsibility Committee, on Friday, February 2 to
better understand why the Board deems him qualified to serve as
Gildan’s CEO. We ultimately left the meeting with more questions
than answers due to Mr. Tyra’s and Ms. Bertrand’s inability to
address our concerns pertaining to poor financial results at Fruit
of the Loom Inc. (“Fruit of the Loom”) and Broder Brothers Co.
(“Broder Bros.”) while Mr. Tyra served in leadership roles at each
company. Following our meeting, we wrote to Ms. Shirley Cunningham,
Chair of the Compensation and Human Resources Committee, requesting
a call to understand how this committee conducted diligence into
Mr. Tyra’s record. Unfortunately, we have yet to hear back from Ms.
Cunningham, despite the fact that this committee is directly
responsible for CEO succession.
Both our research based on public information and our
conversation with Mr. Tyra reveal a record of value destruction.
These findings stand in stark contrast to the Board’s numerous
public statements about its apparently well-governed CEO succession
process and exhaustive vetting of Mr. Tyra, which forces us to
question whether the Board properly exercised its duty of care when
carrying out its most important responsibility. We suspect many
other Gildan shareholders share our concerns. In our view, the
Board owes it to shareholders to promptly address the following
questions via a public disclosure, so the Board’s diligence process
can be properly evaluated:
- When it made its hiring decision, was the Board aware that
Fruit of the Loom’s Activewear division endured a 26% decline in
revenue and operating profit swung from $75 million to a loss of
over $30 million during Mr. Tyra’s tenure as President of that
division?1
- When it made its hiring decision, was the Board aware that
Fruit of the Loom’s share price decreased by 99% and the company
filed for bankruptcy during Mr. Tyra’s tenure?2
- When it made its hiring decision, was the Board aware that
Broder Bros. delivered dismal financial results during Mr. Tyra’s
tenure as CEO (net income decreased from $7 million to negative $3
million, net debt increased from $51 million to $316 million, and
cumulative free cash flow was negative $15 million over the five
years he was CEO)?3
- When it made its hiring decision, was the Board aware that
Broder Bros. was forced to restructure in the years after Mr.
Tyra’s departure as CEO, largely due to the substantial debt he
added to the business, and that its shareholders ultimately
incurred substantial losses?
- How did the Board’s “renowned governance expert” determine
that “the Board followed a good and rigorous process with respect
to succession planning” considering Mr. Tyra’s troubling track
record?4
- How did the Board’s vetting of Mr. Tyra – including
“detailed reference and background checks involving respectively
eight and 24 external arms-length individuals” – fail to reveal
troubling information related to his performance?5
- Did the Board fail in its diligence during the CEO search,
considering the “governance expert” reported that the Board only
vetted Mr. Tyra’s “credentials, competencies and other attributes”
and not specifically his track record?
- How much did the Board compensate its “renowned governance
expert” to author the favorable Governance Report for the
Board?
- Was the Board’s decision to appoint Mr. Tyra, a resident of
Louisville, Kentucky, influenced by connections to Chair Donald C.
Berg, a businessman in Louisville who served on the University of
Louisville President’s Council during the same period that Mr. Tyra
served as Athletic Director at the University of
Louisville?
- Was the succession process overseen by Ms. Cunningham’s
Human Resources Committee or did Ms. Bertrand’s Corporate
Governance Committee handle CEO succession, violating committee
charters?
- Is the Board in possession of any other information that may
impact shareholders’ evaluations of Mr. Tyra and the directors who
led his vetting?
If the Board decided to proceed with hiring Mr. Tyra after
learning about his record of value destruction, we believe it
reveals extremely poor judgement and numerous governance issues. On
the other hand, if the Board made its decision without
investigating Mr. Tyra’s history of value destruction, we contend
it indicates that the Company’s CEO search process had significant
diligence failures. Either way, it appears the incumbent directors
failed shareholders when appointing Mr. Tyra.
No Solicitation
This press release is for informational purposes only and is not
a solicitation of proxies. If Browning West determines to solicit
proxies in respect of any meeting of shareholders of the Company,
any such solicitation will be undertaken by way of an information
circular or as otherwise permitted by applicable Canadian corporate
and securities laws.
Disclaimer for Forward-Looking Information
Certain information in this news release may constitute
“forward-looking information” within the meaning of applicable
securities legislation. Forward-looking statements and information
generally can be identified by the use of forward-looking
terminology such as “outlook,” “objective,” “may,” “will,”
“expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,”
“plans,” “continue,” or similar expressions suggesting future
outcomes or events. Forward-looking information in this news
release may include, but is not limited to, statements of Browning
West regarding (i) how Browning West intends to exercise its legal
rights as a shareholder of the Company, and (ii) its plans to make
changes at the Board and management of the Company.
Although Browning West believes that the expectations reflected
in any such forward-looking information are reasonable, there can
be no assurance that such expectations will prove to be correct.
Such forward-looking statements are subject to risks and
uncertainties that may cause actual results, performance or
developments to differ materially from those contained in the
statements including, without limitation, the risks that (i) the
Company may use tactics to thwart the rights of Browning West as a
shareholder and (ii) the actions being proposed and the changes
being demanded by Browning West, may not take place for any reason
whatsoever. Except as required by law, Browning West does not
intend to update these forward-looking statements.
Advisors
Olshan Frome Wolosky LLP is serving as legal counsel, Goodmans
LLP is serving as Canadian legal counsel, and IMK is serving as
Quebec legal counsel. Longacre Square Partners is serving as
strategic advisor and Pelican PR is serving as public relations
advisor. Carson Proxy is serving as proxy advisor.
About Browning West, LP
Browning West is an independent investment partnership based in
Los Angeles, California. The partnership employs a concentrated,
long-term, and fundamental approach to investing and focuses
primarily on investments in North America and Western Europe.
Browning West seeks to identify and invest in a limited number
of high-quality businesses and to hold these investments for
multiple years. Backed by a select group of leading foundations,
family offices, and university endowments, Browning West’s unique
capital base allows it to focus on long-term value creation at its
portfolio companies.
___________________________ 1 Fruit of the Loom 1999 and 2000
10-Ks. Activewear segment revenue and operating earnings measured
from 1997 through 2000, the period during which Mr. Tyra served as
Executive Vice President and then President of Activewear. 2
Bloomberg. Total return for Fruit of the Loom stock from September
8, 1997 to May 1, 2000. 3 Broder Bros. public U.S. Securities and
Exchange Commission filings including Amended S-4 filed April 16,
2004, 2004 10-K, and 2005 10-K. Free cash flow calculated as cash
flow from operations less capital expenditures. 4 Gildan Press
Release: Gildan Releases Report on CEO Succession Process by
Renowned Governance Expert (January 24, 2024). 5 Gildan Press
Release: Gildan Releases Report on CEO Succession Process by
Renowned Governance Expert (January 24, 2024).
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version on businesswire.com: https://www.businesswire.com/news/home/20240208638364/en/
Browning West info@browningwest.com 310-984-7600
Longacre Square Partners Greg Marose / Charlotte Kiaie,
646-386-0091 browningwest@longacresquare.com
Pelican PR Lyla Radmanovich / Mélanie Tardif,
514-845-8763 media@rppelican.ca
Carson Proxy Christine Carson, 416-804-0825
christine@carsonproxy.com
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