MEC supporters launch last-ditch pitch to stop co-op's purchase by U.S. investment firm
Save MEC targeting investors, credit unions, banks who want to preserve co-op's model
A group of ardent supporters of Mountain Equipment Co-op have put out an online call for financial backing to stop the acquisition of Canada's largest consumer co-operative by an American investment firm.
The group, calling itself Save MEC, is calling on Canadian organizations and investors to step up with a last-minute alternative to the deal, which is expected to move forward in court hearings in Vancouver over the coming few days.
Save MEC member Kevin Harding says there's a "groundswell" of passion for the outdoor-equipment retailer coming from thousands of its five million co-op members. He's trying to harness that energy into a plan to stop what many see as the sellout of an ideal.
"We are sort of tired of business done the usual way. So, people are really reacting to this icon of 'business done differently' under threat," said Harding in an interview in Vancouver on Thursday.
A time extension will be requested at B.C. Supreme Court on Thursday to push back a hearing on the acquisition deal to Monday.
Harding is hoping Save MEC can, on a tight deadline, find enough support from credit unions, banks and investors who want to preserve MEC's model.
He said he's trying to contact all 5.4 million MEC members and ask for their help in derailing the acquisition, and hopes to come up with a credible alternative before Monday morning.
MEC was started in 1971 by a group of mountain climbers looking to source quality gear and distribute it in Vancouver. Members joined with a nominal fee and owned part of the venture, and helped drive the direction of the business.
The current board of directors has already unanimously approved a deal for a private investor to acquire MEC's assets. Los Angeles-based Kingswood Capital Management is set to buy the co-op through the Companies' Creditors Arrangement Act (CCAA).
This legislation enables financially troubled companies to restructure.
Financial details of the transaction weren't disclosed.
MEC has court protection under the CCAA, which allows the co-op to continue operations while the plan is worked out under court monitor Alvarez & Marsal Canada Inc.
'We reject your buyout'
On Sept. 21, Harding issued an open letter to Kingswood.
"An American private equity firm with five employees cannot buy a five million-member Canadian co-operative whose owners refuse to sell," he wrote.
"Kingswood has acknowledged that as member-owners, we are in control of what happens next. We never agreed to sell our co-op. Our response is simple: We reject your buyout."
Last year, the retailer detailed financial problems caused by slow sales, inventory backups, supply chain problems and increasing online competition after a loss of $11.487 million in 2019 on sales of $462 million, according to financial statements audited by KPMG and posted on MEC's website.
On Sept. 14, the board gave an explanation for the sale on the MEC website.
"Despite significant progress on a thoughtful turnaround strategy undertaken by new leadership, no strategy could have anticipated or overcome the impact of the global pandemic," board chair Judi Richardson wrote.
"...Kingswood's commitment to honouring the MEC ethos and the solid financial footing that this transaction will provide gives us tremendous confidence in the future."
Kingswood has committed to keeping at least 17 of MEC's 22 locations across Canada open, and 75 per cent of the workforce.