MEC sold to US investment firm amidst declining sales

Mountain Equipment Co-op (MEC), a longstanding source for camping and cottage gear, has officially been sold, its board of directors announced on Monday. Established in 1971, the outdoor equipment retailer grew into Canada’s largest consumer co-operative with 22 stores across the country and over 5 million members—many of them cottagers.

Los Angeles-based Kingswood Capital Management, a private investment firm that focuses on businesses in transition, purchased the company, with unanimous support from MEC’s board of directors. Kingswood will receive all of MEC’s assets as well as the majority of its retail stores.

The deal was completed through the Companies’ Creditors Arrangement Act (CCAA)—a federal act that allows financially troubled corporations to restructure their affairs while avoiding bankruptcy and providing creditors with some form of payment.

Despite opening new locations and stocking a cottagers’ wish list of water toys, cozy fleeces, and outdoor gear, the company struggled in 2019. Citing slow sales and online competition, financial documents audited by KPMG reveal that in 2019 MEC lost $11.487 million on sales of $462 million.

“After careful consideration of all viable options, the board made this difficult decision,” said MEC’s board chair Judi Richardson in a statement. She added that the spread of COVID-19 exacerbated the situation. “No strategy could have anticipated or overcome the impact of the global pandemic on our business.”

Prior to the pandemic, the board of directors created a special committee to examine alternative financing options to selling, including government-support programs and potential lenders. But the company said that the disruption of COVID impacted MEC’s ability to secure a refinancing on terms that would meet MEC’s future needs.

Moving forward with the sale to Kingswood, the stores will continue to operate. Richardson assured customers that the investment firm is committed to upholding MEC’s ethos of sustainability and environmentalism, and “ensuring a thriving future” for the Canadian retailer. The sale is still subject to Court and regulatory approvals, expected to be completed by the end of 2020. Once the sale is final, MEC will transition away from the co-op model to become a privately-owned company.

Under the co-op model, to shop at MEC, customers had to purchase a $5 co-operative share. The company garnered a loyal following, in part because of its “rock-solid guarantee”, allowing members to return worn- and broken-down equipment. Their perceived loyalty has many of MEC’s members upset over the sale, including one of the co-op’s original founders, Sara Golling.

“MEC was a co-op, and one of the co-operative principles is democratic member control,” she said in an interview on CBC’s As It Happens. “The members were never consulted about this. We were never warned just how bad conditions were for MEC. We knew it was bad but we had rather hoped [the co-op] could survive this rough patch…We could have been asked if we were willing to pony up an extra $5, $10, $50, whatever it might have taken to recapture our co-op.”

Despite a hazy future, MEC says its e-commerce and retail stores will remain open throughout the sale proceedings, in accordance with provincial public health guidelines.

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