SAN DIEGO -- Price Co. and Costco Wholesale Corp. announced Friday they have merged into a new company called Price/Costco, with 206 membership warehouses in four countries and annual sales of more than $15 billion.
Shares of the new company, the nation's largest memebership-warehouse chain with 18 million members and 43,000 employees, started trading Friday on Nasdaq under the symbol PCCW at $19.50 a share.
Each share of Price common stock was converted into 2.13 shares of Price/Costco and each share of Costco was converted into one share of Price/Costco. The deal gave 48 percent ownership of the new company to Price shareholders and 52 percent to Costco shareholders.
The deal, first announced in June, was approved at special shareholder meetings held simultaneously for Price Co. holders in San Diego and Costco holders in Kirkland, Wash.
The new company replaces Wal-Mart Stores Inc.'s Sam's division as the nation's largest warehouse club operator. Sam's sales topped $12 billion last year amid overall industry sales were estimated at $35 billion.
The companies plan to keep operating Price Clubs and Costco outlets, rather than changing the store names. Although the companies have rival stores in several markets, there are no plans to close any stores.
Price Co., which launched the warehouse-membership concept 17 years ago, had been the target of merger and takeover rumors in the increasingly competitive field for the past year. Coscto began operations in 1983.
Analysts have said the deal makes sense because it will produce volume efficiencies without sacrificing the customer loyalty the two chains have built up.
Retail analysts have said Price had a good long-term future, but expanded too fast amid particularly strong competition from such operators as Sam's, Costco and K mart's Pace chain. It was particularly hard hit in its Southern California stores by the three-year recession that lingers in the area.
The new company will operate from two headquarters, located inSan Diego and Kirkland. The Price/Costco board of directors will be comprised of 12 members, six selected by Price Co. and six by Costco.
'This merger presents a tremendous opportunity for long-term growth, ' said Price Co. chief Robert E. Price, who becomes chairman of the merged company and Costco chief James D. Sinegal, who is the new president and chief executive officer.
'Through this combination of two talented management teams with similar operating philosophies, we will be a stronger, more agile competitor, drawing on the skills and talents of both companies to develop new and more efficient ways to deliver merchandise and services, as well as to create the framework for national and international expansion,' the executives said.
Price/Costco plans to add between 35 and 45 warehouse clubs in the United States and Canada in fiscal 1994; two new warehouse clubs will be opened in Mexico in the next six months, one in Mexicali and the other in Queretaro; following the opening of the first warehouse club in the United Kingdom this fall, two more warehouses are likely to open during fiscal 1994 in the U.K.
Price/Costco will extend reciprocal membership privileges beginning Nov. 1 to the 18 million members of the chains.
Price Co. reported last month earnings of $33 million, or 66 cents a share, for its fourth quarter ended Aug. 29, up 11 percent from earnings of $29.7 million, or 60 cents a share, in the fourth quarter of the prior year.
Sales for San Diego-based chain were $1.695 billion, an increase of 0.4 percent from .689 billion in the same 12-week period of the prior fiscal year. Comparable warehouse sales declined 12 percent.
Price Co. announced last December the Canadian subsidiary had signed a joint venture agreement with Centros Comerciales Ceco s.a. to operate Price Club warehouses in Spain and Portugal. It also announced in April it had formed a joint venture to expand into the United Kingdom.