08/29/2012 04:49 EDT | Updated 10/29/2012 05:12 EDT

Gildan CEO to pocket profit by selling large stake in apparel company

MONTREAL - Gildan Activewear's founder could earn more than $80 million, including a sizable profit, after deciding to sell a considerable chunk of his stake in the apparel company for the second time in five years.

Chief executive Glenn Chamandy plans to sell up to 2.75 million shares, or 28 per cent of his 9.8 million shares.

The shares being sold include 2.6 million that he purchased late in 2008 and early 2009 for between $6.85 and $11.69 a piece after concerns about the economy and the restructuring of a key client caused the stock price to plummet.

On the Toronto Stock Exchange, Gildan (TSX:GIL) shares plunged Wednesday after news of the planned divestiture was released. They closed at $30.70, down $1.14, or 3.58 per cent in trading.

Chamandy repurchased the block of shares to help support the stock price and show faith in the company at a time when the economy was weak, said Laurence Sellyn, chief financial and administrative officer.

"Now that we are back on track and he's confident in the outlook for the company, he's selling those additional shares he bought and reverting back to his core economic position," he said in an interview because Chamandy was unavailable for comment.

The company founder initially sold 3.6 million shares in 2007 at an average price of $37 for diversification and estate planning purposes.

Sellyn acknowledged that his business partner will make a profit because he bought at a low point, as could have other investors.

Chamandy said he has entered into a pre-arranged share disposition plan under which a U.S. financial institution will sell the shares once Gildan issues its 2012 results and earnings guidance for 2013 in December.

Under U.S. and Canadian securities laws, company insiders can sell shares over a predetermined period of time and subject to predetermined volume and price parameters.

The plan can only be established when the insider is not in possession of material non-public information.

Once a plan is established, Chamandy will have no discretion over sales under the plan.

Despite the planned sale of stock over a period ranging up to 24 months, he will remain one of the company's largest shareholders with a 5.7 per cent stake, which will continue to represent the majority of his personal net worth.

"It's a time when we're feeling positive about the outlook for the company and he's structured this plan so that he's able to sell over a couple of years and take advantage of further increases in the value of the stock over that time," added Sellyn.

Gildan expects to benefit from lower cotton costs, initiatives to increase profits, cost reduction efforts, volume growth and synergies from acquisitions.

In 2010, Gildan agreed to pay $22.5 million to settle a class-action lawsuit that alleged the company misled investors about its earnings and performance of a factory in the Dominican Republic.

While Gildan's shares were climbing, the suit alleged that Chamandy and Sellyn profited by selling some shares despite failing to report problems. Gildan's shares plummeted in April 2008, eliminating $1.3 billion of shareholder value after it revealed the problems.

Gildan denied any wrongdoing. Sellyn said Wednesday the problems that caused it to lower its guidance were unforeseen.

He said Chamandy structured the share sale this time, as he did before, so that he has no information that isn't available to all shareholders.

Gildan manufactures T-shirts, fleece, socks and underwear at low-cost manufacturing sites in Central America, the Caribbean Basin and Bangladesh.

Headquartered in Montreal, it has more than 30,000 employees.