By Jill Ralph. In early April, Warren Buffett's Berkshire Hathaway group paid $1.7 billion in cash for Clayton Homes, of Maryville, Tenn. The purchase is Berkshire's first in the manufactured housing business, though the holding company has signaled its support of the manufactured-housing sector by providing $215 million in financing to bolster Oakwood Homes as it emerges from bankruptcy.
Buffett's interest in Clayton Homes was sparked by founder Jim Clayton's self-published autobiography entitled, "First, A Dream." Finance students from the University of Tennessee traveled to Omaha to visit the Berkshire chairman. As thanks, they gave him a copy of Clayton's book. The students thought the book might interest Buffett because Clayton Homes has several characteristics of a Berkshire Hathaway acquisition: it is family-run, dominant in its field -- Clayton is the nation's largest manufactured housing company -- and inexpensive, since the manufactured housing industry has declined 50 percent since 1998. "Tell your students they have firmly established their credentials as dealmakers," Buffett e-mailed the faculty adviser of UT's finance club, Dr. Al Auxier. "I'm glad you gave me the book instead of a basketball or football."
Clayton's 20 manufacturing plants produce homes marketed in 33 states through 970 retailers; 287 company-owned sales centers and 82 company-owned community sales offices. The balance (601) is comprised of independent retailers located in 32 states.