Mountain Equipment Co-op (MEC), Canada’s largest outdoor chain with 22 stores, announced its board of directors has unanimously approved a deal in which a Los Angeles-based private investment firm will acquire MEC’s assets, including the majority of its retail stores. Vancouver-based MEC said the transition from a co-operative structure to a subsidiary of Kingswood Capital Management is needed to ensure a stable future for the business.
The retailer has been granted court protection under the Companies’ Creditors Arrangement Act (CCAA), allowing it to continue operating e-commerce and retail stores while the transaction and other elements of the plan are completed. It said it would accept gift cards and honour warranties during this period.
Long-standing MEC member and Canadian Eric Claus will lead Kingswood’s newly-formed Canadian affiliate as chair and CEO.
No financial details were disclosed.
MEC said in a statement that 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.
“MEC is an iconic brand founded on strong values and has a loyal following,” said Kingswood’s Managing Partner, Alex Wolf, in a statement. “We have tremendous respect for those values and the loyal membership and are honored 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.”
Longstanding MEC member and Canadian, Eric Claus, will lead Kingswood’s newly-formed Canadian affiliate as Board Chair and CEO. Claus said he looks forward to upholding MEC’s core values and further enhancing the experience for members.
The sale comes after MEC in July laid off retail employees citing challenges managing through the coronavirus pandemic. The outdoor retailer previously announced layoffs at its headquarters in April, stating it was “experiencing severe cash flow issues as a result of COVID-19.”
MEC, in Monday’s statement, noted that a Special Committee of the Board had been engaged in an extensive examination of options and alternatives to address the persistent financial challenges faced by MEC’s business in recent years. Exacerbated by the disruption from COVID-19, these challenges impacted MEC’s ability to secure a refinancing on terms that would meet MEC’s future needs.
As part of the review, the Special Committee, in tendem with advisors,
- sought refinancing from a variety of potential lenders;
- explored and leveraged applicable government support programs; and
- examined funding MEC through voluntary member assessments.
MEC said the Special Committee ultimately recommended a solution that ensures MEC’s mission will continue.
“After careful consideration of all viable options, the Board made this difficult decision,” said MEC’s Board Chair Judi Richardson. “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. 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. 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.”
About the transaction
To facilitate the transaction, MEC has successfully obtained an Initial Order from the Supreme Court of British Columbia under the CCAA. The CCAA proceedings will allow MEC to continue operating while the transaction and other elements of the plan are completed. Alvarez & Marsal Canada Inc. has been appointed by the Court as the monitor under the CCAA proceedings.
Under the terms of the transaction, Kingswood, through its British Columbia subsidiary, will acquire substantially all of the assets associated with MEC’s retail business. Kingswood has committed to acquire the vast majority of retail stores. Upon completion, the MEC retail business will be under private ownership.
The transaction remains subject to Court and regulatory approvals and is expected to close in the fourth quarter of 2020.
For further information regarding the CCAA proceedings, please contact Alvarez & Marsal Canada Inc., the court-appointed Monitor of MEC at 1-844-768-8244 or firstname.lastname@example.org. Their website is www.alvarezandmarsal.com/MEC.