MEC Will Eliminate Its Co-op Structure Under New Ownership
The struggling Canadian retailer, recently acquired by a U.S. investment firm, will no longer operate as a consumer-cooperative business
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The Canadian retail chain Mountain Equipment Co-op announced yesterday a unanimous decision by its board of directors to sell substantially all of its assets to Kingswood Capital Management, a Los Angeles-based private investment firm.
Under the new ownership, the 22-location company will eliminate its co-op structure, ending the 49-year run of Canada’s largest consumer cooperative. The new CEO and longtime MEC member Eric Claus stated publicly that it’s “highly unlikely” the company’s five million members will get their $5 shares back.
According to a release, the elimination of the co-op structure is “needed to ensure a stable future for MEC’s retail business.” In 2019, the retailer lost a reported $11.487 million on annual sales of $462 million, a slide that capped years of disappointing performance for the company.
Kingswood confirmed that it will purchase the company through the Companies’ Creditors Arrangement Act (CCAA), though further financial details weren’t disclosed. MEC did confirm that the board of directors explored numerous options for keeping the business viable, including “refinancing from a variety of potential lenders, leveraging applicable government support programs, and funding MEC through voluntary member assessments.”
In the end, however, the board concluded that the only realistic path forward was a sale to Kingswood.
“After careful consideration of all viable options, the board made this difficult decision,” said chair Judi Richardson. “No strategy could have anticipated or overcome the impact of the global pandemic on our business. Today’s announcement, including the transition from a co-operative structure, is creating a positive path forward for MEC.”
Kingswood reportedly plans to keep at least 17 of MEC’s 22 stores in operation and lay off no more than 25 percent of the company’s workforce.