Concentrating on the Core

Wal-Mart (Bentonville, Ark.) has agreed to sell its McLane grocery distribution business to Berkshire Hathaway Inc. for about $1.5 billion.

“The sale will allow Wal-Mart to focus completely on its core retail business,” says Lee Scott, Wal-Mart's president and ceo.

The McLane unit, which supplies Wal-Mart's Sam's Club warehouse stores, accounted for $14.9 billion of Wal-Mart's $244.5 billion in sales for the fiscal year ended in January 2003. Wal-Mart also said McLane sold its Merit Distribution Services trucking business to Swift Transportation Co. for about $50 million. Merit provides trucking services to Wal-Mart's grocery distribution centers and other companies.

Wal-Mart bought McLane in 1990. Its management team will remain in place, and its headquarters will stay in Temple, Texas. Wal-Mart said the McLane deal would reduce earnings by about 1 cent per share in the current year, and 2 cents per share next year, excluding a one-time gain.

Omaha, Neb.-based Berkshire Hathaway's holdings range from Dairy Queen ice cream restaurants to Geico insurance. “We believe there is an excellent possibility for expansion of McLane's customer base in the future,” says Berkshire chairman Warren Buffett.