Costco to Buy the Rest of Costco Mexico Victoria Stilwell - Dow Jones
go to original June 14, 2012

Costco Wholesale Corp. plans to buy the rest of Costco de Mexico, a joint venture between the wholesale-club operator and a Mexican retailer, for $760.4 million in cash.

Costco Mexico has been owned 50% by both Costco and Controladora Comercial Mexicana, which runs retail outlets and restaurants.

Costco Mexico plans to issue a dividend of about $340.9 million. Half of the amount will be paid to a subsidiary of Costco Wholesale and the other half will go to Comercial Mexicana.

Costco will use the dividend proceeds and on-hand cash to fund the purchase, while Comercial Mexicana plans to use the dividend and sale proceeds to pay off debt.

Comercial Mexicana completed a $1.54 billion debt restructuring in 2010 after having logged heavy losses on foreign exchange derivatives during the 2008 global financial crisis.

The sluggishness of the economy, heightened by increased gasoline prices, is still being felt by Costco, and the company has faced rising costs for merchandise.

Costco in May reported its fiscal third-quarter earnings rose 19%, although the company's revenue grew more slowly than expected.

Shares of Costco closed Wednesday at $87.43 and were inactive in premarket trade. The stock is up 10% in the last 12 months.

Write to Victoria Stilwell at Victoria.Stilwell@dowjones.com

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