By Andrew Frye
March 23 (Bloomberg) — Warren Buffett’s Berkshire Hathaway Inc., which agreed yesterday to buy the closely held parent of alcoholic-beverage wholesaler Empire Distributors, said it plans to seek more purchases in the industry.
“We expect that the Empire acquisition will provide us with a solid platform for potentially acquiring other similar high-quality wholesale distributors,” Buffett, Berkshire’s chairman and chief executive officer, said in a statement. Terms of the deal for Kahn Ventures Inc. of North Carolina weren’t disclosed.
Buffett is looking for ways to invest Berkshire’s cash after markets recovered last year and profits jumped. The 79- year-old billionaire, who built Berkshire through four decades of takeovers and stock picks, completed the biggest acquisition of his career last month with the $27 billion deal for railroad Burlington Northern Santa Fe Corp. Berkshire’s McLane unit, which had revenue of $31.2 billion last year, will own Empire.
“It’s just planting seeds,” Michael Yoshikami, chief investment strategist at Berkshire shareholder YCMNet Advisors, said of the Empire purchase. “It looks like they’re getting into a new area that they’re going to try to get some expertise in, and trying to expand.”
Buffett transformed Berkshire from a failing textile mill to a company with a market value of $200 billion and more than a hundred units selling products and services including candy, electricity and luxury flights. The Empire acquisition adds to responsibilities of McLane CEO Grady Rosier, whom Buffett praised in his annual letter to investors for turning in record profits as other Berkshire manufacturing, service and retailing units suffered in the economic downturn.
The Exception
“Almost all of the many and widely diverse operations in this sector suffered to one degree or another from 2009’s severe recession,” Buffett said last month in his letter to Berkshire shareholders. “The major exception was McLane.”
McLane, which Berkshire bought from Wal-Mart Stores Inc. in 2003, reported 2009 pretax earnings of $344 million, or about 1 cent for every dollar of sales. The unit supplies retailers, drug stores and convenience stores with groceries and other merchandise and gets about a third of its sales from Bentonville, Arkansas-based Wal-Mart.
“I’m sure that as McLane sees opportunities to grow they will take advantage of them,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha” and founder of the hedge fund Ram Partners LP. “They are working with one of the best balance sheets in the world,” Matthews said, referring to Berkshire’s cash.
Empire executives will stay in place and the business will remain in the same markets, Berkshire said. Empire distributes spirits, wine and beer in North Carolina and Georgia.
–With reporting by Jamie McGee in New York. Editors: Dan Reichl, Brett Miller
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