The Board of Directors of Top 40 supplier Gildan (asi/56842) has accused shareholder Browning West, an investment firm, of violating U.S. anti-trust law in how it recently acquired more shares in the company.

The accusations come as activist investor Browning West is leading a revolt against the board aimed at replacing eight current directors with new ones and reinstalling ousted co-founder/former CEO Glenn Chamandy in the chief executive role.

Directors asserted that Browning West illegally acquired the shares to gain the stake it would need to compel a shareholder vote aimed at reappointing Chamandy, getting rid of newly-appointed board-backed CEO Vince Tyra, and replacing directors.

In a January 21^st public statement, Gildan’s board declared that Browning West accumulated shares in violation of the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 as part of an effort to shake up the Gildan board and the company C-suite.

The HSR Act requires investors to notify the U.S. Federal Trade Commission and U.S. Department of Justice and comply with a 30-day waiting period before acquiring voting securities in excess of a certain ownership threshold, the board said.

“By acquiring shares in excess of the threshold without notifying these agencies and the company, and without waiting 30 days to acquire the shares after providing notice, Browning West violated U.S. law,” Gildan’s directors charged.

Browning West is reportedly now making a filing under the HSR Act under protest. Gildan’s directors are using the alleged violation as a basis for seeking to invalidate Browning West’s requisition under Canadian law for a vote on board member replacement and Chamandy’s future with the company.

In a letter to shareholders, Browning West panned the board. Browning West principals said the firm poses “no substantive antitrust concerns to any concerned authority” and accused the board of suppressing shareholders’ voices, while spending large amounts of money to protect directors’ reputations and maintain their control of Gildan.

“Despite holders of approximately 35% of Gildan’s outstanding shares independently publicizing their support for Browning West’s campaign, these directors are deploying Gildan’s corporate machinery on self-serving legal tactics,” Browning West said. “We know that the board has hired at least three law firms, two investment banks, a public relations firm, a proxy solicitor, and a private investigator. This absurd level of expenditure is being borne by shareholders and deployed against our own interests.”

Gloves are definitely off in this 15-round fight:

Gildan Board, CEO Ratchet Up Dispute as New Chief Executive Begins Term https://t.co/4zlJgIX3js

— Chris Ruvo (@ChrisR_ASI) January 19, 2024

Browning West also said that Gildan’s directors retained a law firm that Browning West had used since the hedge fund’s inception – “a deplorable tactic that poses serious legal and ethical issues” and one that that has the investor worried its confidential information has been compromised.

Despite the heat from the board, Browning West said it’s not backing down. The firm is still pushing for a special meeting where a shareholder vote could determine the future leadership of Gildan.

“Browning West is in no way deterred or intimidated,” the firm said. “We are completely committed to taking all necessary steps, including through the legal and regulatory channels, to protect our investment and set a strong foundation for long-term value creation at Gildan.”

The controversy began in mid-December after the board dismissed Chamandy and announced its intention to replace him with Tyra. The board subsequently said its decision to remove Chamandy was rooted, in part, in what had become his alleged ineffective, disengaged leadership and an alleged ultimatum he gave directors regarding proposed acquisitions and his staying as CEO for several more years. Chamandy denies such an ultimatum was ever made.

Based on estimated 2022 North American promotional product revenue of $762.2 million, Gildan ranked fifth on Counselor’s most recent list of the largest suppliers in the industry.

Across all its business channels, including promo and others, Gildan tallied record total revenue of $3.24 billion in 2022. Through the first nine months of 2023, the company’s sales were down 4.3% compared to the prior year. Full-year results for 2023 are due out in the first quarter of 2024.