Sale of leading Canadian co-op MEC prompts campaign to save it

Nearly 70,000 people have signed a petition to scrap a deal selling Mountain Equipment Co-op to US private equity firm Kingswood Capital Management

There was sad news for the Canadian co-op movement on Monday when leisure retailer Mountain Equipment Co-op (MEC) was sold to a private equity firm.

Los Angeles-based private investment firm Kingswood Capital Management will acquire the business and its assets. MEC will no longer operate as a member-owned co-operative. It was founded in Vancouver in 1971 and its model saw it sell outdoor gear and clothing exclusively to lifetime members.

While the new owner plans to keep at least 17 of the 22 MEC stores operating, there will be job losses. The news has seen more than 71,000 people sign a petition on to ‘Save MEC’, with the number rapidly increasing.

MEC – which at the time this article was written still describes itself as a co-op on its website and is still offering memberships – has been struggling in recent years; last year it lost CA $11.487m (£6.7m) on sales of $462m (£$270m).

In a statement on its website, MEC told its 5million members that a special committee of the co-op board had conducted “an extensive examination of options and alternatives to address the persistent financial challenges faced by MEC’s business in recent years.

“Exacerbated by the unprecedented disruption of the Covid-19 pandemic, these challenges impacted MEC’s ability to secure a refinancing on terms that would meet MEC’s future needs.”

MEC added: “The acquisition will strengthen MEC’s balance sheet, preserve jobs and guarantee members continued access to authentic advice and high-quality products at competitive prices.”

Alex Wolf, managing partner at Kingswood, said: “MEC is an iconic brand founded on strong values and has a loyal following.

“We have tremendous respect for those values and the loyal membership and are honoured to be partnering with Canadian operating partners who will represent us on the ground in Canada working with MEC’s management team following the closing to ensure a bright future for MEC. Upon completion of this transaction, we – together – can inspire and equip Canadians in leading an active outdoor lifestyle for years to come.”

MEC member Eric Claus will lead Kingswood’s newly formed Canadian affiliate as board chair and CEO, and “looks forward to upholding MEC’s core values and further enhancing the experience for members”.

MEC chair Judi Richardson said: “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 on our business.”

She said the sale – “including the transition from a co-operative structure” – creates a “positive path forward for MEC”, adding: “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. Since our founding in 1971, MEC’s deeply loyal customers have been synonymous with who we are and what we do. That won’t change.”

But the petition to scrap the deal says: “MEC is a $500m a 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.”

It says the deal was approved without the permission or “any meaningful consultation” of the membership and calls on MEC directors “to cancel the deal, and hold immediate open, fair and democratic board elections”.

Members on the Facebook group Save MEC have voiced other concerns – including what happens to member data once it is acquired by the new firm. Other concerns highlighted in lively debate on the page include how effective consultation of five million members can be over issues of business survival; what happens to members’ CA$5 membership fee; and whether or not the business is viable and worth saving. Some favour going back to basics as an outdoor equipment co-op, arguing it has lost touch with its roots by stocking expensive brands like North Face.

MEC has also seen controversy over its democratic process – concerns highlighted in the petition, which refers to allegations made against the co-op earlier this year that board elections had been “rigged”. There were complaints that members had suffered long delays and technical problems when trying to vote, and criticism of rule changes in 2012 and 2013 which allowed the board to recommend candidates and deny others a place on the ballot if they are deemed unqualified.

Former director Steve Grant told Vancouver City News in May that the changes had brought business professionals onto the board, leading to a confusion of governance and executive functions.

“The board is not there to run the business,” he said. “The board is there for vision and guidance. The board hires a CEO who is responsible for managing the business, and he hires a team of managers to effect that.” 

In its response to the criticism at the time, MEC said 91% of members voted for the rule changes in 2013 and it encouraged all members to vote for whomever they please.

“Our recommended candidates have financial, organisational turnaround, and strategic retail leadership experience because MEC would benefit from this type of professional background, experience and network,” it added.