Berkshire to Buy Wal-Mart's Grocery Distributor
Warren Buffett's
Berkshire Hathaway
(BRKA)
will buy
Wal-Mart's
(WMT) - Get Report
grocery distribution unit for a little less than $1.5 billion.
The purchase of McLane Co. comes as one of the industry's biggest players,
Ahold NV's
(AHO)
US Foodservice, is enmeshed in an accounting scandal. Buffett, whose reputation for above-board business dealing is as high as anyone's, said in a release announcing the deal that "there is an excellent possibility for expansion of the customer base in the future."
McLane, based in Temple, Texas, contributed about $15 billion of sales to Wal-Mart last year. It is a wholesale distributor of groceries and other items to convenience stores, drug stores, wholesale clubs, mass merchandisers, restaurants, theaters and other outlets. It was acquired by Wal-Mart in 1990.
As is his habit, Buffett will leave the acquired company's existing management in place.
Wal-Mart also agreed to sell its Merit Distribution trucking unit to
Swift Transportation
(SWFT)
, a Phoenix-based national truckload carrier. Excluding a one-time gain, the transaction will have a dilutive effect on Wal-Mart's earnings of about 1 cent a share in fiscal 2004 and about 2 cents in fiscal 2005.