Usman Nabi was certain from the beginning that it would end this way — with his firm seizing control of Gildan Activewear Inc. as the company’s directors headed for the exits.

“We’ve always known we were going to win,” he said. 

Six months ago, few people inside corporate Canada had even heard of Browning West LP, the investment partnership founded in 2019 by Nabi and Peter Lee. They know it now, after Browning triumphed in an expensive and high-profile proxy fight at Gildan, one of world’s largest makers of T-shirts and other cheap apparel.  

The battle — which began in December when Gildan’s board sacked longtime Chief Executive Officer Glenn Chamandy — featured lawsuits, conspiracy theories and plenty of mudslinging. Browning West wanted Chamandy back. The board hired a new CEO in Vince Tyra, an ex-Fruit of the Loom executive who’d had a stint as the University of Louisville’s athletic director.

In the end, Gildan spent some US$65 million on advisers, legal fees, severance and other related expenses, according to Chamandy — more than one per cent of its market capitalization. It’s even more than Walt Disney Co. paid to fend off activist shareholders including Nelson Peltz earlier this year. 

The dollar figure is one indicator of how hostile it was. Gildan’s board publicly accused Chamandy of being a checked-out CEO, more interested in his golf resort in Barbados than running a $6 billion public company. But inside Gildan, some executives were quietly organizing on his behalf and urging shareholders to back Browning’s campaign to oust the existing board and Tyra, their new boss. 

The rebellion worked. 

• 'We're turning the page': Gildan's reappointed CEO on returning leadership

Faced with imminent defeat, Gildan’s entire board quit last week. The departures included former Goldman Sachs Group Inc. executive Tim Hodgson, who was brought in as Gildan’s new chair on May 1 — an unsuccessful attempt to persuade shareholders they could get an improved board without handing control to Browning West and Chamandy.

Now Tyra is gone, Chamandy is back and the directors are the eight men and women chosen by Browning West. All of them received at least 82 per cent of the shares voted in the board election, Gildan said in a statement Wednesday.  

“I think when we approach other public companies where change is required,” Nabi said, “folks are probably going to listen a little bit more carefully the next time.” 

Leadership focus

The Gildan proxy fight was shaped by Nabi’s time at H Partners Management LLC. There, he was part of the team that recapitalized Six Flags Entertainment Corp. and later pushed to replace the CEO of mattress maker Tempur Sealy International Inc. 

Under new leadership, both companies produced nice gains for investors, though in Tempur’s case it took several years for the strategy to work. Browning West is its fourth-largest holder today, according to data compiled by Bloomberg.

The experience showed that the quality of the top executives can make all the difference, Nabi said. Lee had a similar mindset. The two men, who both once worked for Lazard Inc., linked up to launch Browning West about five years ago and soon started building a stake in Gildan, which has produced annual returns of more than 18 per cent for shareholders since it went public in 1998. 

Chamandy — who ran Gildan with his brother Greg before becoming sole CEO in 2004 — is a supplier to Walmart Inc. and other apparel sellers. It has steadily built market share by exploiting a cost advantage over rivals such as Fruit of the Loom, a product of what Gildan executives said was Chamandy’s unparalleled knowledge of an intricate supply chain. 

The company takes cotton from the U.S. South and turns it into yarn that’s eventually transformed into T-shirts, socks and underwear by workers in low-wage textile centers such as Bangladesh. Chamandy knows better than anyone how to squeeze costs out of a vertically integrated manufacturing chain, Nabi said, and that’s the key. 

“It’s this game of inches,” Nabi said. “So the first thing you’d know is, let’s not hire someone who has no manufacturing experience, which is what the board did” when it chose Tyra, he said. 

Gildan’s board may have made a tactical error in the way it announced Chamandy’s departure on Dec. 11. The statement gave no explanation as to why the veteran CEO had left and said Tyra wouldn’t start working for two months. The stock fell 11 per cent that day.

It wasn’t until later that the board, then led by former alcohol executive Don Berg, came out with its story: that Chamandy, who’s in his early 60s, had run out of sensible ideas for growth, was proposing risky acquisitions and was stalling the board’s planning to find his eventual replacement. 

By that point, Chamandy had already grabbed control of the narrative, saying he’d been fired by a board that hadn’t consulted shareholders. Several of the largest investors went public with their unhappiness about the CEO change. 

By the end of December, Nabi and Lee had recruited former United Rentals Inc. CEO Michael Kneeland as a prospective new chair for Gildan, and the fight was on. “Our campaign started with a request for two board seats, then it went to five, and then it went to eight,” Nabi said. 

Browning West, which is based in Los Angeles, manages $1.6 billion for investors, including university endowments, wealthy individuals and the partners. Lee and Nabi say they have more than 90 per cent of their net worth in their fund. And the investment strategy is unusual. All of the money is in just six stocks, with the intention of owning them for years.

Under the operating plan unveiled by Browning West and Chamandy in March, Gildan will borrow more, repurchase stock, move additional production to Bangladesh and try to expand its sales of higher-quality products. There are ambitious targets — a $60 stock price by the end of next year, about 60 per cent higher than Tuesday’s closing price. If anything, the pressure on Chamandy is greater now: he’s accountable to a board that helped him get his job back. 

Gildan is Browning West’s second-largest holding, with a stake worth about $350 million. “What that means is, Gildan is extremely important to us as a fund,” Lee said, “but it’s also extremely important to us personally.”