Gildan CEO Vince Tyra in Toronto, on Feb. 1.Christopher Katsarov/The Globe and Mail
Gildan Activewear Inc. GIL-T won backing from Quebec’s largest asset manager ahead of a crucial shareholder vote for control of the board of directors at the Montreal-based clothing manufacturer.
On Wednesday, the Caisse de dépôt et placement du Québec loaned Gildan $200-million, which the company will use to buy back shares and pay down existing debt. The financing supplemented the Caisse’s endorsement of Gildan’s embattled existing board and management team ahead of the company’s annual meeting on May 28.
The Caisse’s loan, a five-year note that pays 6-per-cent interest, is conditional on Gildan keeping its head office in Quebec for a minimum of seven years and committing to paying the 15-per-cent global minimum tax rate set out by the Organization for Economic Co-operation and Development.
Gildan’s board faces an activist campaign led by asset manager Browning West. The Los Angeles-based fund wants to reinstate Gildan co-founder and former chief executive officer Glenn Chamandy, who the board dismissed in December. Browning West’s strategy for Gildan includes taking on more debt to fund share buybacks.
Shareholders are scheduled to decide between Gildan’s existing board, which recently replaced the majority of its members, and a slate put forward by Browning West at the annual meeting later this month.
Gildan is also in the midst of a sales process the board launched after receiving an unsolicited takeover offer early this year. U.S. private equity funds are considering making offers to one of country’s largest consumer product companies, according to analysts.
The Caisse’s endorsement of Gildan’s current board includes support for CEO Vince Tyra, a former Fruit of the Loom executive who joined the company in January.
“The refreshed board and the new CEO of Gildan have the right business plan, clear commitments to keeping its headquarters in Québec and to pay global minimum tax. This is why CDPQ has decided to support the growth of this major Québec company,” Kim Thomassin, an executive vice-president and head of Québec investments at the Caisse, said in a press release.
“It’s a first step to a partnership that will expand with our intention to become an important shareholder of the company in this new context.”
The Montreal-based Caisse, which manages $434-billion in assets and is a significant investor in a number of Quebec companies, used to be one of Gildan’s largest shareholders, but sold its stake in 2022 after disagreeing with the company’s tax strategies.
“We are pleased that given our longstanding relationship, CDPQ, one of Canada’s most admired and successful investors, has decided to make this investment in Gildan,” Tim Hodgson, chair of Gildan, said in the release. “We view it as a strong validation of our board, management team and ongoing commitment to shareholder value creation.”
Mr. Tyra said in the release that “this investment and partnership with CDPQ is a very positive indicator about the strength and potential of the business as well as the refreshed board and management team.”
Gildan has a $7.7-billion market capitalization, and approximately 35 per cent of its shareholders have previously said they support reappointing Mr. Chamandy as CEO and electing the Browning West slate of directors.
Andrew Willis