Late last year, the Vancouver-based retailer also announced that it had taken shelter from its creditors in order to “facilitate the transaction”.
The new owner is Kingswood Capital Management, a California-based company that invests in retail, but also energy, communications, and healthcare, among others.
The amount of the transaction was not disclosed.
The private fund has pledged to acquire “the vast majority” of retail stores, or 15 out of 22, according to a document prepared by the controller. It was not possible, Monday evening, to know if the four from Quebec (Montreal, Laval, Longueuil and Quebec) will be part of it.
MEC, long known as Mountain Equipment Coop, employs 1,500 people across the country at its head office, distribution centers and stores.
MEC’s board of directors supported the sale “unanimously”, it was said in a statement released at the end of the day. This solution “will strengthen the balance sheet” of the retailer and “preserve jobs”, it is argued.
MEC has faced “lingering financial challenges” in recent years. These were exacerbated by the pandemic and the forced closure of stores, which had “an impact on MEC’s ability to obtain refinancing on terms that would meet [its] future needs.”
In the fiscal year ended February 2019, the retailer lost $ 11.5 million on sales of $ 462 million. More recent data has not been released.
“Difficult decision”
A special committee did a “thorough review” of the options. He contacted various potential lenders, “proactively explored and exploited applicable government support programs” and examined “the possibility of voluntary funding by members”.
In the end, the board “made this difficult decision” to sell the chain of stores, said MEC board chair Judi Richardson.
“Today’s announcement, including the transition out of a cooperative structure, creates a positive path for MEC. Kingswood’s commitment to upholding MEC’s ethics and the solid financial foundation that this transaction will provide us with gives us great confidence in the future, ”she added.
For his part, Kingswood said he would partner with “Canadian operational partners” who will work with the MEC management team after the acquisition “to ensure a bright future for MEC.”
Kingswood’s new Canadian branch will be headed by Eric Claus, described as a long-time MEC member and Canadian. He will serve as both Chairman of the Board of Directors and CEO.
In a document submitted to the courts, Monitor Alvarez & Marsal Canada made forecasts for the 11 weeks that will end on November 29. The period is expected to end with negative cash flow of $ 11.6 million on sales of $ 68 million.
According to these predictions, interim funding of up to $ 89 million may be required. It will be provided by RBC, CIBC and TD banks, which have already been lending to MEC for years.
Unhappy customers
On Facebook, MEC’s last official post in English is dated June 2. The retailer then announced that it was ceasing all publication on social networks until June 7 “in solidarity with black communities”. The gesture was appreciated by some, but more internet users who were unhappy with customer service spoke out.
The French page instead ceased to be fed on June 24. “In honor of the National Day of Quebec, we present to you five wonders of here where to pitch your tent for a stay in nature more than perfect! “
The cooperative arrived in Quebec in 2003, with a first branch at the Marché central in Montreal. The shares cost $ 5, the same price as the original. Asked about these millions of contributions, a spokesperson was unable to tell us Monday evening if members would see the color of their money again.
Yeah, they basically went into bankruptcy protection for anyone too lazy to read the article, and were forced to sell. Have been losing money for a long time, even before the pandemic.
Wonder if that’s why they stopped doing warranty repars/returns. They said it was due to COVID, but now I’m curious. The rest of the world has somewhat moved on in this regard.
Love all the “members” on twitter complaining they didn’t get a vote. You really want to vote on how your co-op crashes and burns?
It’s literally a legal obligation. There will probably be a class action lawsuit. There have been plenty of co-op sales in the past that have gone through just fine that were completed appropriately.