British Columbia

MEC sale to proceed after B.C. judge denies attempt to have it paused

The sale of beleaguered outdoor recreation retailer Mountain Equipment Co-op to U.S. private investment firm Kingswood Capital Management will go ahead.

Co-op members were asking to have a say in the future of the beleaguered outdoor recreation retailer

The Save MEC campaign filed an application in a B.C. court last week to adjourn the sale to California-based Kingswood Capital Management, part of an effort to raise funds to preserve the retailer's status as a co-operative. (Ben Nelms/CBC)

The sale of Mountain Equipment Co-op will go ahead after B.C. Supreme Court Justice Shelley Fitzpatrick approved the sale and dismissed an application by members to have it delayed. 

"We've known from the beginning that this was a bit of an uphill climb,'' said Kevin Harding, national spokesman for the Save MEC campaign.

"The laws that are around the [creditor protection] process don't recognize co-ops or members as being important in the slightest, so the odds were stacked against us.''

Save MEC was trying to prevent the sale of the beleaguered outdoor recreation retailer to U.S. private investment firm Kingswood Capital Management. A petition launched by the group had garnered nearly 145,000 signatures by Friday.

The legal challenge was mounted in collaboration with the B.C. Co-op Association, Alberta Community and Co-operative Association and Co-operatives and Mutuals Canada, "to protect the integrity of the co-op model and to put member rights at the forefront of the transaction."

The group had asked the court to give it time to come up with a counter proposal to address MEC's liquidity issues, including selling real estate, obtaining operating loans and bringing in a credit card rewards program.

But in a response filed earlier this week, the company doubted the group's ability to address MEC's cash flow issues, noting that the proposed sources of potential funding don't involve "concrete commitments or realistic options.''

Vancouver-based Mountain Equipment Co-Op filed for creditor protection on Sept. 14, 2020 (Jonathan Hayward/The Canadian Press)

André Beaudry, Director General of Co-operatives and Mutuals Canada, says today's ruling could open up a Pandora's box of legal concerns. 

"For 49 years MEC was a co-operative. In the B.C. Co-op Association's legislation ...  and in MEC's own bylaws it was very clear that members needed to be consulted before a partial or total sale of assets," Beaudry said.

"Can a process like this now move forward in other co-operatives in Canada where the members aren't consulted?"

Harding said the judge noted the passion of the co-operative's members in her oral ruling.

He said an attempt by landlords of some of MEC's brick-and-mortar stores to intervene in the proceedings was also dismissed.

On Sept. 14, after struggling with sluggish sales, inventory issues and increasing online competition, MEC filed for creditor protection and announced its sale to a Canadian subsidiary of Los Angeles-based Kingswood.

In a statement, the company's board of directors said, "the sale strengthens MEC's finances and core operating business, preserves jobs, retains the vast majority of MEC's locations and guarantees members continued access to authentic advice and high-quality products at competitive prices."

Mountain Equipment Co-op was launched as a grassroots co-operative in 1971 with six members and about $65 of operating capital.

The company grew to roughly 5.8 million members, according to court documents. Members paid a one-time membership fee of $5 to join, which entitled them to one share in the co-op and the right to shop at MEC.

About the Author

Karin Larsen

@CBCLarsen

Karin Larsen is a former Olympian and award winning sports broadcaster who covers news and sports for CBC Vancouver.

With files from Genevieve Lasalle and Canadian Press

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