Membership warehouses operator Costco Wholesale Corp. (COST) agreed Thursday to buy out the 50 percent stake in its Mexican unit from joint venture partner Controladora Comercial Mexicana S.A.B. de C.V. or CCM, for 10.65 billion pesos or $760.4 million. The stake in Costco de México, S.A. de C.V. will be acquired through Costco Wholesale's wholly-owned subsidiaries.
The deal is subject to CCM shareholder approval and the approval from Mexican Federal Competition Commission.
The joint venture was formed in October 1993 when Costco Wholesale merged with Price Co. in a stock swap valued at more than $2 billion. Meanwhile, Comerci, a CCM subsidiary, had a joint venture partnership with Price Co. The 50-50 joint venture was being operated by Issaquah, Washington-based Costco Wholesale.
Further, Huixquilucan, Mexico-based Costco Mexico has declared a cash dividend of around 4.77 billion pesos or $340.85 million, 50 percent payable to an unit of Costco Wholesale and 50 percent to CCM.
Costco Wholesale will use the dividend proceeds, existing cash and investment balances to fund the buy out of remaining 50 percent of the joint venture. Meanwhile, CCM will use the dividend and sale proceeds to pay down debt.
Costco Wholesale noted that CCM Chairman Guillermo González Nova, and CCM CEO Carlos González Zabalegui will continue to be on the board of Costco México, with Jaime Gonzalez Solana continuing as CEO of Costco México.
COST closed Wednesday's regular trading session at $87.43, down $0.68 on a volume of 1.41 million shares, lower than the three-month average volume of 2.28 million shares.
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