trending Market Intelligence /marketintelligence/en/news-insights/trending/tnRLUTG0zdoWsYLvwhdhIQ2 content esgSubNav
In This List

Buffett: American Express was right to walk away from Costco deal


S&P Capital IQ Pro | Powering Your Edge


Street Talk Episode 81: Amid strong recovery, Banc of California hearing more M&A chatter


S&P Capital IQ Pro | Unrivaled Sector Coverage

Case Study

A Prestigious Global Business School Gains a Competitive Edge

Buffett: American Express was right to walk away from Costco deal

Chairman, President and CEO Warren Buffett backed 's decision toend its co-brandpartnership with Costco Wholesale Corp., calling the arrangement valuable butnot valuable enough to justify the proposed deal terms.

Buffettsaid during a May 2 appearance on CNBC that he was not involved in thenegotiations between American Express and Costco, but he kept up with them andultimately agreed with the card company's choice. American Express facesincreasing competition and will need to recover from losing the co-brandpartnership, but it still boasts a strong franchise.

"Itcan be very tough sometimes, but if you aren't willing to walk away, you'regoing to get pushed around pretty dramatically," Buffett said."Costco was a very, very, very valuable co-brand to have for AmericanExpress, but that value wasn't limitless."

BerkshireHathaway is the largest shareholder of American Express, a position thatBuffett said duringthe company's April 30 annual shareholders meeting that he remains comfortablewith owning. On CNBC, he touted the company's commitment to share buybacks as away to boost its valuation amid a tougher environment. American Express haslowered its average share count by 6% over the past year, CFO Jeffrey Campbellsaid on an April 20 earnings call, according to a transcript.

"There'sno question that the whole area of payments is subject to attack by all kindsof people, and they're very smart people, they're high-tech people, and they'retrying to figure out faster, cheaper, better ways of handling payments. AndAmerican Express, with that being their business, is not only under attack now,but they'll be under attack as far as the eye can see," Buffett said."We think it's a wonderful business, but it's not a business that'scompetition-free at all."