Buying a Business 47In the fall of 2003, Buffett was invited to attend the University of
Tennessee’s MBA Symposium. He recounted the Clayton story, and
then presented all the students who had started the ball rolling with
honorary PhDs (for Phenomenal, hard-working Dealmaker) from the
University of Berkshire Hathaway. Each student was also given one class
B share of Berkshire, and their teacher, Al Auxier, was presented with an
A share.
MCLANE COMPANY
In 1894, Robert McLane, escaping the post-Civil War poverty of South
Carolina, moved to Cameron, Texas, and started a small grocery store.
Over the years, he developed it into a wholesale grocery and distribution
business. His son, Robert D. McLane, known by his middle name of
Drayton, joined the company in 1921. Drayton’s son, Drayton Jr., began
working in the family business at the age of nine, and spent many teenage
Saturdays sweeping f loors in the warehouse. After college, he joined the
company full time.
Eventually Drayton Jr. convinced his father to move the company
close to an interstate highway and then in 1962 to automate the business
with computers. In 1990, he sold the company to his tennis pal Sam Wal-
ton, and McLane became a Wal-Mart subsidiary, supplying Wal-Mart
and Sam’s Club stores, as well as convenience stores and fast-food restau-
rants across the nation with everything from peanuts to pepperoni.
By 2003, McLane had become the largest distributor in the United
States to corner and convenience stores. McLane’s innovative software
systems for pricing, freight, delivery, and point-of-sales processing and
its excellent delivery service had made the company a lean and eff icient
full-service delivery company.
An eff icient, well-run company built on strong principles and show-
ing consistent prof itability is just what Warren Buffett likes to see. In
May 2003, Berkshire announced it had acquired McLane for $1.45 bil-
lion in cash, and assumed an additional $1.2 billion in liabilities.
The acquisition positioned McLane for even greater growth, as it
freed the company to pursue distribution contracts with supermarket
chains and with Wal-Mart competitors, such as Target and Dollar Gen-
eral. “In the past some retailers had shunned McLane,” wrote Buffett in