MEC will be on a stronger financial standing going forward, but it comes at the price of ending its 49-year history as a cooperative.
The co-op retailer’s board of directors announced today it has approved an agreement that will allow Kingswood Capital Management to acquire all of MEC’s assets under the Companies’ Creditors Arrangement Act, including most of its brick-and-mortar stores. The move will shift MEC into becoming a private retailer.
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“After careful consideration of all viable options, the board made this difficult decision. 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,” said MEC’s board chair Judi Richardson in a statement.
“Today’s announcement, including the transition from a co-operative structure, is creating a positive path forward for MEC. 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.”
A release states the acquisition will not only strengthen the co-op’s financial position, but also save jobs and guarantee members continued access to products at competitive prices.
Eric Claus will become the new board chair and CEO of the US-based investment firm’s MEC division, replacing Philippe Aratta, who took on the co-op’s leadership role in May 2019.
If approved by the court and regulatory entities, the sale is expected to be finalized in the fourth quarter of 2020.
“MEC is an iconic brand founded on strong values and has a loyal following,” said Kingswood’s Managing Partner, Alex Wolf.
“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.”
MEC’s financial troubles began long before the onset of COVID-19, but the pandemic exacerbated the issues.
It experienced a loss of $11.5 million in its most recent fiscal year report, for the period ending in February 2019. MEC blamed the overall negative performance on higher costs and increased competition in the retail market, especially with the surge in online retail.
In January 2020, the co-op announced it would sublease its 2014-built, 112,000-sq-ft office building at 1077 Great Northern Way and move into a smaller space that is more appropriate for its current needs.
Following the recent opening of the new two-level, 40,000-sq-ft Vancouver flagship store in Olympic Village, MEC now has 22 locations across the country.