Gildan Activwear Inc. cemented its Québec presence as part of a private placement agreement.
The agreement is with the Caisse de Dépôt et placement du Québec (CDPQ). Gildan will issue senior unsecured notes having an aggregate principal of 200 million Canadian dollars and bearing an interest rate of 6 percent per year, maturing five years from their issuance date. Gildan said it will use the net proceeds to fund its common share repurchase program and for the repayment of maturing outstanding debt. As part of the agreement, Gildan said it has agreed to “maintain strong local leadership and its global headquarters in the Canadian province for a minimum of seven years, as well as committing to become a Global Minimum Taxpayer (GMT). GMT legislation in Canada is expected to be enacted this year, retroactive to Jan. 1.
“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,” Kim Thomassin, CDPQ’s executive vice president and head of Québec, said in a statement on Thursday. “This is why CDPQ has decided to support the growth of this major Québec company. 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.”
Gildan last month refreshed its board amid its ongoing proxy fight with activist investor Browning West. The battle between the two began after Gildan fired co-founder and longtime CEO Glenn Chamandy. The activist, and eight other institutional investors who together hold a 35 percent stake in Gildan’s voting shares, hope to put Browning West’s slate of board directors in place. If they can accomplish this at the upcoming annual shareholders’ meeting on May 28, the expectation is that their first order of business would be to fire current CEO Vince Tyra and reinstate Chamandy.
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Meanwhile, Tyra held an investor update last month in which he noted five priorities to drive growth at the underwear and tees giant, with the first one centering on Gildan’s supply chain. Gildan also put itself up for sale after receiving a “confidential nonbinding expression of interest.” But the bad blood between Gildan and Browning West has the activist charging that the sale process is in full collapse.
Tim Hodgson, Gildan’s new chairman following board refreshment, said, “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. We view it as a strong validation of our Board, management team and ongoing commitment to shareholder value creation.”
“We believe 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,” Tyra said. “I look forward to leading Gildan from my new home city of Montréal and creating value for all of Gildan’s shareholders.”
Gildan said the closing of the private placement transaction is expected to occur around June 4, 2024.