Group of co-op members raises funds to fight MEC’s sale

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A group of co-op members has raised more than $50,000 for a legal fund in a campaign to stop the sale of outdoor retailer MEC to a U.S. private equity firm.

The group, which calls itself “Save MEC,” plans to petition the court this week for representation in the proceedings that began last week when the retailer obtained creditor protection and announced the planned sale to Kingswood Capital Management LP.

Many members immediately objected to the plan, saying that, under MEC’s co-op structure, they should have been consulted. MEC has said that obtaining protection under the Companies' Creditors Arrangement Act (CCAA) means that the deal does not require member approval, since companies under CCAA can sell assets with court approval.

The group of members has retained Victory Square Law Office in Vancouver and plans to ask for representation at MEC’s next court appearance on Sept. 28.

“In practical terms, it gives us a vote on any proposal, and also gives us an ability to make alternative proposals and to make legal submissions on objections to any part of the process or any orders that the presiding judge would make,” said Colin Gusikoski, a partner at Victory Square.

The group also wants to hold an emergency members' meeting to replace MEC’s board of directors.

“The board has proven they’re disconnected from the members by doing this and not even asking us,” said Kevin Harding, a Vancouver resident who is one of the representatives with the Save MEC campaign. “If they had come to members and asked us to participate in this, we could have pulled together a plan to save the co-op.”

After the sale was announced last week, members set up a Facebook group to discuss opposition to the deal, and some began reaching out to lawyers. Members also started a Change.org petition that has since gathered more than 100,000 signatures. This gave them contact information as well to send updates on their plans and ask for further support, Mr. Harding said. The legal fund was raised through a GoFundMe campaign, he said, which reached its $50,000 goal yesterday.

The group wants to present “credible alternative proposals” for the business, Mr. Harding said. The group would like to keep the business in Canadian hands and retain the co-op structure.

“The members don’t have a voice in this process right now,” Mr. Harding said.

Two groups representing co-operatives – Co-operatives and Mutuals Canada and the British Columbia Co-op Association – have also been looking at the sale and have called on the federal government and B.C.'s provincial government to make sure legislation governing co-ops has been “respected” in the deal.

“BCCA and CMC have been working together to understand how the CCAA connects with the BC Co-operative Association Act and believe that the legislation needs to be reviewed in order to ensure that the co-op principles are understood and upheld in proceedings like this,” BCCA executive director Andrea Harris said in an e-mail last week.

MEC’s board of directors said in a statement Monday that they had followed “expert legal and financial advice” in deciding on the deal.

“If the discussions had been public, it would have caused uncertainty and disruption not only within MEC, but also with vendors and creditors. This uncertainty could have irreparably harmed the organization,” the statement said. “...The board had a stark choice: preserve the MEC brand and business under new ownership or enter liquidation ending the MEC legacy.”

The backlash from members has become a public-relations issue for MEC’s prospective new owner. On Monday afternoon, Kingswood released an open letter to members acknowledging their concerns about a sale to an American private equity firm, and anger over the process. The company promised that as owners, Kingswood would spend money on store and e-commerce improvements; continue to donate to charitable causes MEC has previously supported; and build a product mix focused on “outdoor living and technical gear that made you fall in love with MEC in the first place.” The firm is also considering measures such as loyalty programs and discounts to keep members engaged.

“We expect you to hold us accountable and we welcome your constructive feedback,” the statement said.

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