The member campaign and the Canadian co-op community are studying their legal options after a British Columbia Supreme Court ruling authorizing the sale of retailer MEC to private interests based in California.
After several days of hearings on the sale of the outdoor specialist, the court, which has yet to release written reasons for its judgment, has leaned in favor of a proposal put forward by Kingswood Capital Management and rejected arguments submitted by members criticizing MEC’s board of directors for not having consulted them.
“We believe there are some fundamental legal principles that this ruling ignored,” said the Save MEC / Sauvons MEC member campaign, which is united with Co-operatives and Mutuals Canada (CMC). “The rights of members of co-ops, and those of credit unions are at stake.” The transaction strengthens the company’s finances and keeps jobs, MEC said in a written statement.
Founded in 1971, MEC has more than twenty branches in Canada, including a few in Quebec. Since its founding, 5.8 million people have paid $ 5 to acquire a share, including 750,000 in Quebec, according to Sauvons MEC.
Struggling financially even before the pandemic, the company sowed outrage among its members on Sept. 14 by filing for court protection under the Companies’ Creditors Arrangement Act (CCAA).
If she did not turn to members to sort out her financial problems, she argues on her own website, time was running out and the amount to be raised was too large for a voluntary contribution.
Kingswood’s proposed base price is $ 120 million, a bid that climbs to $ 150 million with the assumption of liabilities from MEC, whose annual revenues are $ 450 million. Kingswood is committed to keeping 17 of the 22 stores in operation and retaining 75% of the 1,143 active employees (94 are in Quebec).
For its part, Sauvons MEC claims to have accumulated letters of intent that total potentially $ 100 million in financing for another transaction.
“There was a strong hope that the rights of cooperative members would be recognized. However, we were aware that under the CCAA this was a first, so there was no precedent. From that perspective, it was difficult to assess our chances, “said Francophone spokesperson for Sauvons MEC, Marie-Hélène Viau, in an interview.
“But we thought we had a good cause since the members had not been consulted and the provincial law of British Columbia is still quite clear on the rights of the members to be consulted for such a decision. “
The membership campaign received strong support when Co-operatives and Mutuals Canada (CMC) joined in with the British Columbia Cooperative Association (BCCA) and the Alberta Community and Cooperative Association (ACCA). They, too, pleaded the case in court. What’s next?
“Our lawyers are talking to each other, there will be a meeting on Monday,” CMC general manager André Beaudry said in an interview. All options will then be considered.
The analysis of the process to be followed will have two parts, said Mr. Beaudry. Although the law in question is that of British Columbia, which would result in an appeal in that province’s Court of Appeal, the CCAA used by MEC’s board of directors is federal law.