MEC lays off about 80 staff at head office
Move comes ahead of deal to privatize
Beleaguered outdoor retailer MEC laid off about 80 head office employees Thursday, sources said, ahead of a controversial takeover by American private equity firm Kingswood Capital Management.
The laid- off workers will not receive severance pay, according to an internal email reviewed by The Logic, but they can participate in the creditor-protection proceedings overseeing the sale if they believe they’re entitled to more compensation.
One MEC employee said that at noon Pacific Time Thursday, head- office employees received an email with either a termination notice or the offer of a job under the new management. Those laid off included employees with decades of experience at the company. The employee, whom The Logic has agreed not to identify because of their concerns about the implications of speaking publicly about the layoffs, said a manager told them Thursday about 80 people were being let go.
Another employee who worked at MEC’S Vancouver head office and who was permanently laid off Thursday said a manager told them they were one of more than 80 people being let go. The source, whom The Logic agreed not to identify, said that figure includes both active and inactive employees — workers who had been furloughed during the pandemic or were on leave. It is a potentially important distinction, as Kingswood’s bid for the retailer included a commitment to keeping 75 per cent of MEC’S active employees.
A B. C. Supreme Court judge ruled last week in favour of the deal that will see Los Angeles- based Kingswood purchase the co- op’s assets and take it private. The deal had been contested by a group representing the co-op’s members called Save MEC, which sought more time to put together an alternative bid that would preserve MEC’S co-op status.
MEC did not directly reply to questions about the layoffs, but sent The Logic a statement from the board saying they were “pleased” that Kingswood now plans to keep more active employees than initially planned, and a greater number of stores open, as well.
Kingswood also declined to confirm the layoffs.
“I can’t speak to layoffs as we don’t own the company,” said incoming CEO Eric Claus in a statement to The Logic. Kingswood and MEC expect their deal to close in mid- October.
In comments that echoed the statement from MEC’S board, Claus highlighted Kingswood’s plan going forward, noting it will now keep 21 out of MEC’S 22 stores open — four more than first promised.
“We also plan to retain more staff than initially planned, and now expect to have more than 85 per cent of MEC’S active workforce continuing with us as we go forward.”
Kingswood “will retain 85 per cent of all active employees as at close of day” Wednesday, said Claus, indicating any layoffs were part of the roughly 15 per cent of the workforce that won’t remain once Kingswood takes over.
As of Sept. 7, MEC had 1,143 active employees, 197 on leave and 176 on temporary layoffs, according to court documents.
MEC will pay the laid- off employees “earned wages and vacation up to and including your termination date” minus any applicable deductions, according to an email shared with The Logic.
“However, you will not be provided any termination/ severance pay,” it reads.
“To the extent that you believe you have any claims for further compensation, you will be eligible to participate in the claims process to be established in connection with the CCAA.”
MEC entered into creditor protection last month, after amassing $23 million in losses, 42 per cent more than its losses reported the year before. The co- op’s years- long financial challenges were exacerbated by the COVID-19 pandemic, impeding its efforts to secure new financing.
Lawyers for MEC revealed at hearings last week that the co-op is losing about $1.6 million weekly, and said any delay could jeopardize the deal as it erodes the value proposition.