• Gildan Activewear said on Monday that it will hold a special election to determine if ousted CEO Glenn Chamandy will return.
• Gildan has been under pressure from investment firm Browning West to bring back Chamandy.
• Chamandy says the board is pursuing a "value-destructive" strategy by undermining his reputation and not listening to its shareholders.

The board of directors for Gildan Activewear, facing pressure from activists to reinstate the company's fired CEO, have agreed on Monday to call a special meeting that could determine who ends up at the helm and whether the board stays intact.

Glenn Chamandy was ousted in December by Gildan's board, which initially provided no reason for the move and said Vince Tyra would be the new CEO. Since then, the board alleged that Chamandy was distracted by non-Gildan business pursuits, like a Barbados golf course, and that he threatened to quit unless directors backed an acquisition-focused growth strategy.

Chamandy denies both claims and says the board is pursuing a "value-destructive" strategy by undermining his reputation and not listening to its shareholders.

Shortly after Chamandy was fired, investment firm Browning West, which at the time owned 3.9% of Gildan's stock, sent a letter to the Montreal-based company's board, demanding Chamandy's reinstatement. The investment firm has grown its position to around 5% and built enough momentum among the shareholder base that the board on Monday agreed to calling a special meeting. It's scheduled for the end of May.

In a statement Monday, Browning West's co-founders Peter Lee and Usman Nabi said Gildan's board was demonstrating a "complete disregard for sound corporate governance and a total lack of respect for the will of shareholders" by setting the special meeting for May and "choosing to waste shareholder resources" by challenging Browning West's legal standing to request a meeting.

Browning West's move is unusual in the activist world, where investors are more often focused on replacing CEOs than backing them. But Browning West, which is based in Los Angeles, has gained the support of eight other major existing shareholders, including Anson Funds, Janus Henderson and Turtle Creek Asset Management, all of which are supporting Browning West's push to reinstate Chamandy as CEO.

Chamandy is the grandson of Gildan's founder and helped take the company public in 1998. He had been sole CEO since 2004.

Browning West, a long-time shareholder, points to Chamandy's success in an increasingly competitive industry as one reason why he should be CEO. The activewear space has been hotly contested in recent years, as a pandemic-driven pivot to leisurewear showed staying power even after many workers returned to the office.

Meanwhile, Tyra's record, the firm says, is one of "value destruction." He previously had roles at Fruit of the Loom, which filed for bankruptcy, and Broder Brothers, which went through a financial restructuring.

Gildan's board is led by Donald Berg, the former CFO of Brown-Forman. Berg has served on Gildan's board since 2015 and has been chair since 2019. The company has enlisted the support of Coliseum Capital, a Connecticut-based investment manager.

Browning West seeks to replace Berg and seven other directors with their own nominees, including Chamandy and Browning West's Lee.

Gildan says it's "ready and willing" to engage with shareholders, but disputes the legality of how Browning West increased its ownership position from just under 4% to around 5%. But the company hasn't shown a clear commitment to putting the vote to shareholders. Last week, Gildan applied to a Quebec court to nullify Browning West's request and to cancel the meeting.

Browning West said it was "considering all of its rights" and urged the board to not delay the meeting further. Gildan referred CNBC to its prior statements.

Gildan's stock price is down around 8% since Chamandy's firing, while the S&P 500 is up 7% over that stretch.

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