Is Costco buyout bait?

Posted Feb 12th 2007 11:50AM by Tom Taulli
Filed under: Berkshire Hathaway (BRK.A), Private Equity, Costco Wholesale (COST)

Costco Wholesale (NASDAQ:COST), which has 23 million members, got a bullish take from Barron's last week.

Despite its large size, the company continues to grow nicely. Earnings are expected to increase at 10%+ annually and same-store sales continue to be strong.

Could Costco be a buyout candidate?

Perhaps. The company has a rock solid balance sheet, with $2 billion in cash. It also owns about 78% of its stores. This should make it easy to raise a lot of debt to get a deal done.

And with the high valuation of Equity Office Properties Trust (NYSE:EOP) buyout, there should be some interested buyers.

In the meantime, Costco still looks good as a standalone investment. Hey, even Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) owns 5 million shares.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Tags: Bershire Hathaway, Blackstone, Buyout, COST, Costco, EOP, Equity Office, Warren Buffett