It’s been one week since we learned that MEC was being sold to Kingswood Capital Management LP under the Companies’ Creditors Arrangement Act (CCAA) proceedings. In the past seven days, over $70,000 has been raised for an MEC legal fund and over 120,000 people have signed a petition to “save MEC.”
Social media accounts dedicated to keeping the co-op Canadian have seen a flood of support by members around the world, including from organizations such Vancity Credit Union, the British Columbia Co-op Association (BCCA) and John Horgan, the premier of B.C.
MEC was founded here in BC and has been a big part of the lives of British Columbians who love the outdoors. It's sad to see Canada's largest co-op being sold off to a U.S. firm without consulting the millions of members.https://t.co/teTQVs6IBt
— John Horgan (@jjhorgan) September 15, 2020
The group of members who are organizing the fundraiser mentioned above, recently annoucned: “Wow! What an incredible response. In just a couple of days we’ve reached our initial goal of $50,000 so we can go to court to defend MEC members’ interests at the CCAA hearing, and try to stop the sale of our coop. We still need your help as the total costs may be much higher – so please donate, every bit counts!”
Now it will be up to a judge to make the decision about the future of the co-op. Will members be given an opportunity to save MEC before it’s sold?
You can see the latest financial report here, which shows that the company has $389 million in assets and $230 million in liabilities. In the latest fiscal year, MEC had sales of $463 million and an operating loss of just over $26 million.
Many members have suggested that the co-op needs to refocus on core strengths and to stop further expansions, which is what Phil Arata was working on. Arata became the CEO of MEC in July 2019 after David Labistour retired.
Eric Claus will lead Kingswood’s newly formed Canadian affiliate as board chair and CEO. He’s replacing Arata. Claus was formerly CEO of U.S. discount grocer Save-a-Lot and the Canadian discount apparel chain Red Apple.
Claus wrote a letter to MEC members this week here, in which he said, “We’re not asking you to trust us – we’re asking that you judge us by our actions.”
Kingswood calls themselves a “lower-middle market equity firm” with a small portfolio of investments into things like an auto retailer called Auto Anything and Wave Electronics, a distributor of audio/video products.
Sorry, Claus, but there’s not a lot of Canadian outdoor retailer experience in the Kingswood portfolio to build trust on.
“And while we regret that a sale was necessary and appreciate that some members are angry about not having had an opportunity to consider a member-led solution, those matters were and are beyond our control,” said Claus.
“What is not beyond our control or yours – is what happens next.”
Kevin Harding, the Save MEC national spokesperson, responded to the letter with, “MEC is more than a brand – it’s a co-operative that’s legally owned by its members. Kingswood misses the point entirely – members aren’t upset about points or programs, it’s that they’re trying to take our co-op from us.”
Harding continued with, “An American private equity firm with five employees cannot buy a five-million-member Canadian co-operative whose owners refuse to sell. 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.”
View this post on Instagram
Help save Mountain Equipment Coop from being underhandedly sold to a US private equity firm without any meaningful consultation or permission from members! Link to the petition is in our bio 👆⠀ ⠀ “We are calling on the MEC Board of Directors to cancel the deal, and hold immediate open, fair and democratic board elections.⠀ …⠀ MEC is a $500 million / year business with tremendous wealth in real estate assets. Selling off the co-operative not only disenfranchises its members, but will hand over this value with little oversight or accountability.”⠀ ⠀ Don’t let the current MEC board set a dangerous precedent for the quashing of economic democracy! ⠀ ⠀ #SaveMEC #MountainEquipmentCoop #coop #cooperativas #cwcffcct #democratizetheenterprise #consumercoop
Jon Steinman, MEC member number 40480519, wrote in The Province this week: “It’s the member-owners of MEC who should be granted the chance to decide what the future should hold for MEC, whether it’s deciding to 1) liquidate some or all of the business and its assets and distribute those proceedings equitably among member-owners or 2) to reinvest all or some of those proceedings into the development of a more streamlined, relevant and successful business that continues to fulfil the co-operative’s mission and vision.”
Dave Stibbe, a member for more than 30 years, told CBC that the sell is a “gutless move by the board of directors” and that “it’s tragic.”
Toronto Star business columnist, David Olive, wrote Canada is the beating heart of the MEC franchise, and it deserves to stay in our hands, and said, “As it stands, Kingswood is poised to cash in on one of the easiest turnarounds going. A streamlined MEC is going to make someone a fortune. Why not the locals? The current proposed deal, for which the financial terms were not disclosed, looks like the handiwork of a MEC board lacking merger and acquisition smarts. It looks, in other words, like they are giving away the store.
MEC was founded as a co-operative and the sale to a private American company by a board (which was supposed to be replaced in July), who many believe created the problems it’s being sold for, justifiably doesn’t sit well with its member shareholders.
For 49 years, Mountain Equipment Co-op has been an important part of Canada’s outdoor communties, from rock climbing and skiing to paddling and camping. Whether saving MEC is a futile fight or not, it’s one that must go on.