Gildan Activewear Inc.’s largest investor said the clothing maker’s shares are undervalued, signalling that potential acquirers circling the company may need to pay up to win shareholders’ support.

The Canadian company, which owns the American Apparel brand, has improved its “already strong” position over the past three years by investing in technology and expanding manufacturing, Jarislowsky Fraser Ltd. portfolio manager Charles Nadim said in an emailed statement. The asset manager, a unit of Bank of Nova Scotia, has a 7 per cent stake in Gildan.

The company’s moves “should lead to attractive returns for long-term investors relative to what could be a short-term view in light of events and stock underperformance over the past four months,” Nadim said. “The current share price does not reflect the long-term prospects of the company.”

Gildan — which has been in turmoil since the board fired long-time Chief Executive Officer Glenn Chamandy in December — said Tuesday that it has started a sale process as “several” potential buyers have expressed interest in a takeover. Private equity firm Sycamore Partners is said to be among those exploring an offer.

The shares traded at $51.14 at 11:57 a.m. in Toronto, up more than 10 per cent since the takeover interest was revealed. It has a market capitalization of about $8.6 billion.

A dissident group of investors that owns about one-third of Gildan’s shares is seeking to reinstate Chamandy and has harshly questioned the board’s actions. In Canada, a proposed takeover normally requires the approval of two-thirds of the votes cast at a meeting of investors.