Reuters reports this afternoon that Wal-Mart Stores Inc. will sell its McLane Inc. distribution unit to Warren Buffett's Berkshire Hathaway Inc. The deal is reported to be worth close to $1.5 billion to Wal-Mart.
Wal-Mart said in a prepared statement that the sale of the distribution business, which it acquired 13 years ago, would allow it to focus exclusively on its retailing ventures.
Analysts say that part of the reason for the sale was that in order to expand, McLane was having to service Wal-Mart's competition, a conflict that will no longer exist under new ownership.
At the same time, McLane sold its Merit Distribution Services trucking business to Swift Transportation Co. for about $50 million.
McLane accounted for $14.9 billion of Wal-Mart's $244.5 billion in sales for the most recent fiscal year.
According to Reuters, Berkshire Hathaway owns everything from Dairy Queen to Geico insurance.
Wal-Mart said in a prepared statement that the sale of the distribution business, which it acquired 13 years ago, would allow it to focus exclusively on its retailing ventures.
Analysts say that part of the reason for the sale was that in order to expand, McLane was having to service Wal-Mart's competition, a conflict that will no longer exist under new ownership.
At the same time, McLane sold its Merit Distribution Services trucking business to Swift Transportation Co. for about $50 million.
McLane accounted for $14.9 billion of Wal-Mart's $244.5 billion in sales for the most recent fiscal year.
According to Reuters, Berkshire Hathaway owns everything from Dairy Queen to Geico insurance.
- KC's View:
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Well, we guess that you can put to rest the speculation that Wal-Mart might be interested in acquiring Ahold's troubled US Foodservice division as a way of bolstering its share of that segment, as well as get about speculation that Wal-Mart might be interested in getting a bigger share of the grocery wholesaling pie, even to the point of buying Fleming.
Nope. It looks like Wal-Mart wants to be a retailer…
Though the interesting thing about this is that back on March 24, MNB had a story in which Jay Fitzsimmons, senior vp and treasurer of Wal-Mart, told an investor group that “the misconception is that we're in the retail business. We're in the distribution business.”
(Guess the treasurer is always the last one to know…)
Fitzsimmons also said that while it is generally believed that Wal-Mart buys and sells at the lowest price, in fact Wal-Mart sells at the lowest price because it has the lowest distribution costs.
That's probably true, and it won’t change because of selling off the McLane business.
And we can only guess that Wal-Mart's decision to redouble its retail-focused efforts is bad news for everyone else in the business. After all, if McLane was distracting the company for some reason, can you imagine what how well Wal-Mart will do now that the distraction is gone?
