Cash Burning a Hole in Wal-Mart's Pocket?

After selling off its McLane distribution business to Berkshire Hathaway (BRK.A Quote), Wal-Mart (WMT Quote) itself may go shopping.

Dropping the distributor will allow Wal-Mart to focus on its core retail operations. Meanwhile, Berkshire would be getting a growing company with plenty of bottom-line potential.

Some also speculate that the company's sale of McLane could pave the way for a retail-related acquisition, either here in the U.S. or overseas.

Wal-Mart is already making a play for Safeway U.K., a rival of its British subsidiary Asda. The company might also be looking at other international deals, which conceivably would grow faster than McLane and allow Wal-Mart to extend its business into areas where it doesn't yet have a presence.

"All signs point to them getting cash together for an international acquisition," said one fund manager, who asked not to be named.

Meanwhile, the company also may have its eyes on targets closer to home. Rumors swirled recently that Wal-Mart was taking a close look at BJ's Wholesale Club. While some have dismissed those rumors, the company may well try to pick up a regional grocery chain to help jump-start its new neighborhood market store concept, suggested Patrick McKeaver, an analyst with SunTrust Robinson Humphrey.

"They've been growing (the neighborhood markets concept) pretty aggressively, but it's still a small piece of their overall business," said McKeaver. "At some point or other, they're going have to do some sort of acquisition." His firm has no banking relationship with Wal-Mart.

But the company didn't need to sell McLane to make an acquisition, noted Todd Slater, who covers the company for Lazard Freres. The proceeds from the sale won't help much with most acquisitions, Slater noted. Meanwhile, the company generates enough cash from its operations that it didn't necessarily need to sell McLane to purchase something else.

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