In an unusual strategic disposal, Wal-Mart Stores Inc. said yesterday that it would sell its McLane Co. division to Berkshire Hathaway Inc. in a $1.45 billion deal that puts Berkshire in position to become the dominant player in the food-distribution industry.
For Wal-Mart, selling a piece of itself is a rare event; one company executive could not recall it happening before. For Berkshire Hathaway, the purchase seems especially well-timed, with many of McLane's competitors such as Fleming Cos. of Lewisville, Texas, and U.S. Foodservice of Columbia, Md., either foundering or under investigation.
While McLane will still handle distribution for Wal-Mart, ownership under Berkshire Hathaway will free it to pursue distribution contracts with Wal-Mart competitors such as Target Corp. and Dollar General Corp., as well as supermarket chains.
A celebration erupted at McLane's home office in Temple, Texas, when the sale was announced yesterday morning, said a spokeswoman, Kimberly Woodard. "We're definitely optimistic about our growth now," she said.
McLane, which is already the largest distributor to corner stores in the country, had sales of $22 billion last year in cigarettes, tobacco, candy and other items delivered to Wal-Mart and Sam's Club stores as well as to 7-Eleven, Exxon Mobil convenience stores and fast-food restaurants such as Kentucky Fried Chicken.
Warren E. Buffett, Berkshire's chairman and principal stakeholder, said in a statement that he, too, expected growth from his latest acquisition. "Grady Rosier has developed a service-oriented organization that supplies tens of thousands of locations in an extraordinarily efficient manner," he said, referring to McLane's chief executive. "We believe there is an excellent possibility for expansion of the customer base in the future."
Financial experts who follow Buffett's dealings said his purchase of McLane was very much in the pattern of his other acquisitions in recent years.
"He likes simple businesses, businesses that are not complex," said Robert G. Hagstrom, author of several books on Buffett and a senior vice president at Legg Mason Inc., a financial services firm in Baltimore.