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Canstar Community News
The sale of Canada’s largest consumer cooperative is causing a stir among local members, many of whom are disappointed to see Mountain Equipment Co-op dissolve its existing structure and change hands into private American ownership.
Members trickling in and out of Winnipeg’s MEC location on Portage Avenue Wednesday expressed frustration, disappointment and resignation in response to news of the company’s sale — with some going so far as to suggest they may not continue to shop at the beloved Canadian outdoors-store.
Barry Kehler has been a member of MEC since the store arrived in Winnipeg nearly two decades ago. He doesn’t live near the store, he said, but still makes an effort to support the co-op whenever possible. After hearing about the sale, Kehler said he’s disappointed to see the company switch ownership.
"I’m not even sure I’ll shop here in the future," Kehler said. "I have no reason to come back — depending on the prices I’ll give it a go, but it’s not as attractive."
Glen Williamson, a MEC member since the ‘70s, was also disappointed to hear ownership of the company would be crossing the border.
"It’s been a great company, a great Canadian company, that’s one of the things that’s been a little bit disheartening," Williamson said outside the Winnipeg store Wednesday.
"But if it’s being bought by an investment group out of the States, well, welcome to life."
In a release Monday, MEC announced it would be dissolving its co-op structure and selling its assets to Kingswood Capital Management, a Los Angeles-based private investment firm, after a unanimous decision from the company’s board of directors.
The acquisition will take place under the Companies’ Creditors Arrangement Act (CCAA), which allows the company to continue business as usual through the transition.
"Kingswood has tremendous respect for MEC’s legacy and roots," MEC board chair Judi Richardson said in an email Wednesday.
"They are working with Canadian operating partners on the acquisition who are also longstanding MEC members, so they understand what the membership means to so many Canadians."
The company boasts more than 5 million members — more than 90 per cent of whom live in Canada — with 22 Canadian stores and more than 2,500 employees, according to the company’s 2018/19 reports. Many of those 5 million members have expressed concern that the membership was not consulted before the sale.
"It seemed a bit out of the blue," said MEC member Amy Smith on Wednesday. "I didn’t really see it coming and would have assumed that I would have heard a little bit more being a member of the co-op."
The decision to sell the store was "very difficult," though not particularly hasty, Richardson said. The company had been working to reshuffle its business model since 2016, as competition from online shopping options and big-box retailers chipped away at the company’s revenues.
MEC recorded a net loss of $11.5 million on sales of $462 million in 2019, according to audited financial statements. The COVID-19 pandemic only exacerbated the existing financial trouble, Richardson said.
"The choice was stark: Create a path for MEC to thrive under new ownership that would maintain a large store presence, employment opportunities and a commitment to MEC’s ethos or fold up the MEC tent for good," she said in an email.
"Filing for CCAA protection and the acquisition was the only option that would save MEC from bankruptcy or liquidation."
Kingswood plans to retain 17 of its 22 Canadian stores and 75 per cent of staff, though the company said it’s still too early to say which locations are on the chopping block.
An online petition started by Paul Finch in Vancouver calling on the board to cancel the sale and hold immediate board elections had reached more than 33,000 signatures by Wednesday.
MEC is aware of pushback from its members, but maintains its only options were to sell or fold.
"We recognize this is unsettling news for many members. It was, after all, a very difficult decision," Richardson said.
"After extensive examination of options and alternatives to address the persistent financial challenges faced by MEC’s business in recent years, we sought a solution that not only ensured MEC’s short-term survival, but also its long-term success."
It’s unclear whether members will see any of their $5 shares returned. Richardson told the Canadian Press Monday that members would need to claim themselves as creditors to stake claims on their shares. Otherwise, former members will transition into run-of-the-mill customers under the private ownership.
Julia-Simone Rutgers is a general-assignment reporter.
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