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Browning West Urges Gildan Activewear's Board of Directors to Promptly Answer Questions Related to Apparent Diligence Failures During Its CEO Search
[February 08, 2024]

Browning West Urges Gildan Activewear's Board of Directors to Promptly Answer Questions Related to Apparent Diligence Failures During Its CEO Search


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 ood 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.

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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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