Struggling outdoor retailer MEC will shift from a co-operative model to private ownership after entering into a deal to be acquired by an American private investment firm, the co-op said Monday evening.

MEC’s board unanimously supported an agreement with California-based Kingswood Capital Management LP after a special committee of the board failed to find a way to secure refinancing on suitable terms as the COVID-19 pandemic compounded its ongoing financial woes.

The special committee and expert advisers looked to a number of potential lenders for refinancing, at applicable government support programs and at other measures, but came to the “difficult decision” to pursue an acquisition, said MEC board chair Judi Richardson in a statement the co-op released Monday.

“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,” she said, adding that the new direction “is creating a positive path forward for MEC.”

MEC did not immediately respond to The Logic’s request for comment.

The COVID-19 pandemic exacerbated MEC’s ongoing financial struggles and “impacted MEC’s ability to secure refinancing on terms that would meet MEC’s future needs,” the co-op said in the statement.

MEC has struggled to make a profit. In its 2018–2019 financial year, it blamed increased competition for a $11.5-million loss, with a jump in sales from about $454.8 million in the previous year to nearly $462.5 million.

The co-op has yet to report its 2019–2020 earnings.

While the co-op has cited online and increased competition as a reason for its struggles in recent years, as The Logic reported in June, many observers have blamed the retailer’s troubles on how it has been run. Critics have taken aim at its rapid expansion and a 2013 rebrand that moved away from its traditional backcountry focus and added yoga mats and commuter bikes to its mix of merchandise. Blaming competition also glossed over the millions in restructuring fees that included payouts in severance to former staff as part of an undisclosed number of layoffs.

It brought on Phil Arrata in July 2019 to take over from chief executive David Labistour, who helmed the organization for 11 years. Arrata, who served on the MEC board previously, “believes passionately in MEC’s purpose and the potential of the co-op model,” the co-op said at the time.

It launched a turnaround plan at the start of this year that focused on cutting costs, changing inventory and other measures. It switched casual store staff into more permanent roles and offered them better benefits and other protections in an effort to thwart turnover, and wanted to sublet its Vancouver headquarters after deeming them unnecessarily large.

However, the pandemic, which forced most retailers to shutter stores temporarily, created further problems.

The co-op postponed its annual general meeting weeks ahead of its scheduled date this year as it grappled with the challenges from the coronavirus pandemic and operated under what it called a “keep the lights on” model. MEC temporarily closed its stores and laid off more than 1,300 staff in the interim.

The upcoming change in ownership means MEC’s longstanding co-operative model, which boasts more than five million members who paid a $5 lifetime fee, will cease to exist.

Kingswood has formed a Canadian affiliate to acquire “substantially all” of MEC’s assets, including “the vast majority of retail stores,” according to the press release—at least 17 of MEC’s 22 stores, according to The Globe and Mail.

MEC’s board contacted more than 65 lenders, according to the newspaper. They received signed letters of intent from potential bidders in the single digits and a “handful” of offers. It selected Kingswood because it planned to keep the most stores open.

Eric Claus, a veteran retail executive and MEC member, will lead the new affiliate, serving as chief executive and CEO.

The retailer obtained an initial order from the Supreme Court of British Columbia under the Companies’ Creditors Arrangement Act to facilitate the transaction. Alvarez & Marsal Canada is MEC’s court-appointed monitor.

The transaction is subject to various court and regulatory approvals, but MEC expects it to close in the fourth quarter of this year.