Canadian outdoor retailer Mountain Equipment Co-op (MEC) recently announced some big news, as the company has obtained creditor protection and been acquired by a U.S.-based investment firm.
On September 14, it was announced that MEC has filed for and been granted protection under the Companies' Creditors Arrangement Act (CCAA) and that its board of directors has unanimously approved a deal for Los Angeles-based Kingswood Capital Management to acquire most of the company's assets, including the majority of its stores.
MEC's board chair Judi Richardson said in a release that it was a "difficult decision" and that "[d]espite significant progress on a thoughtful turnaround strategy undertaken by new leadership, 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," Richardson said.
While the exact details of the acquisition have not been disclosed, it has been announced that the new organization will continue to use the MEC name and brand. Nova Scotia-based Eric Claus will also become the newest CEO, replacing Phil Arrata.
And perhaps the biggest change announced yesterday, as part of the deal, MEC will no longer operate as a member-owned co-operative.
As MEC currently operates, members each hold a co-operative share, worth about $5.00. Claus says that it is "highly unlikely" that members would get their share value back.
"Like in any business, if it's a co-operative or another, equity ranks at the bottom of the list," he said. "I'm sure there'll be some people that won't be happy they lost their $5.00, but I think the co-op's given them over the years a lot more value than $5.00."
Claus goes on to say that the company is still hoping to find a way for membership to have value, and that the company is committed to remaining involved in the community.
MEC was formed in Vancouver in 1971. It currently has more than 5 million members and 22 stores across Canada.
Kingswood Capital Management's acquisition of MEC is still subject to regulatory approvals, but is expected to close in the fourth quarter of 2020.