commitment that other mills followed suit. Berkshire Fine Spinning alone produced five million yards of nylon fabric for the war effort, and it and others found a new outlet for their many languishing spindles and looms.
The final merger that would impart the name on today’ s modern conglomerate occurred in 1955, when Berkshire Fine Spinning merged with Hathaway Manufacturing. The merger resulted primarily from continued relentless industry pressures. But it was set in motion by a flooding of the Hathaway Mill on Cove Street in New Bedford, Massachusetts, which was significantly damaged by Hurricane Carol in September 1954. Eager to remain in business, Seabury Stanton, Hathaway’ s leader, pursued a merger with Berkshire Fine Spinning. The merger was finalized on March 14, 1955.
Leading the new enterprise were John H. McMahon as chairman of the board, Seabury Stanton as vice chair and Malcolm G. Chace, Jr. as president. The managers were upbeat, writing in the first annual report in 1955,“ The purpose of the combination of the two companies was to effect operating economies and greater diversification of products for each. The new Company can now supply the market not only with plain fine combed cotton goods, but also with fancy colored box loom fabrics and with rayon, nylon, dacron and other synthetic fabrics.”
That optimism proved short-lived. Shortly after the merger, in July of that year, a strike caused a 13-week shutdown. The next month, Hurricane Diane severely damaged several plants in Rhode Island. These early episodes would set the stage for the many troubles and tough decisions that would be faced during the ensuing decade. The many corporate mergers that occurred prior to the formation of the combined Berkshire Hathaway, Inc. created a textile conglomerate. The business had locations throughout New England and was quite large, with combined revenues of over $ 65 million in 1955.
Aside from the acquisition of Bourne Mills in 1956, management acted rationally in shrinking the business over the following decade, rather than continuing to acquire other mills in hopes of finding ever-elusive synergies. Over the 10 years ended in 1964, a net of $ 22.3 million, or about 42 % of shareholders’ equity from the beginning of the period, was sent to
The Beginnings of Today’ s Berkshire Hathaway, Inc.
shareholders in the form of dividends and share repurchases, leaving the company with $ 22.1 million of equity by 1964.
Warren Buffett gained control of Berkshire Hathaway a decade later, in 1965. Ten years after that, he made an addition to the textile group rather than another subtraction. During 1975, Berkshire acquired Waumbec Mills and Waumbec Dyeing and Finishing Co. in Manchester, New Hampshire. On April 28, 1975, Berkshire purchased the company for $ 1.7 million, partially funding the purchase with $ 1.15 million of promissory notes issued by Berkshire at the parent company level. This followed a decade where Berkshire reduced production or sold off certain textile manufacturing locations. So why buy Waumbec?
Buying a company in a dying industry doesn’ t make sense on the face of it, but a few factors likely influenced the decision. First, Waumbec was like Berkshire’ s existing Home Fabrics division and focused on the more profitable finished woven products, primarily drapery and apparel. Buffett thought it could complement Berkshire’ s existing operations. Next, the purchase appealed to Buffett’ s instinct to acquire bargains. The purchase price for Waumbec was below book value, reflecting its diminished economic position. In the notes to the financial statements in Berkshire’ s annual report for 1975, a disclosure is made: to balance the purchase price against the book value of the company, no net property, plant and equipment was carried on the consolidated financials.
The below-book value purchase price was a result of Waumbec’ s weak operating results. Waumbec was operating 55 % of its looms at 50 % of operating capacity.
There was a dark spot among the good news in 1976, and unsurprisingly, it was in textiles. Returns on revenues and on capital were back to trend and inadequate. The Waumbec Mill, acquired only a year earlier, was not pulling its weight. The entire group continued a long slide into economic oblivion. Still, Buffett believed“ reasonable returns on average are possible.” He told shareholders that the Textile Group was an important source of employment in New Bedford, Massachusetts and Manchester, New Hampshire.
By 1977, Berkshire remained in textiles despite its shrinking size and dismal prospects. Of its $ 379 million of identifiable assets at year-end 1977, just $ 22 million were in the textile division. Still, Buffett put himself in the shoes of a minority shareholder and asked the question: why was Berkshire continuing to operate the Textile Group when it seemed to present nothing but problems, and where opportunities clearly existed to redirect the capital elsewhere? Among his reasons:“ Our mills in both New Bedford and Manchester are among the largest employers in each town, utilizing a labor force of high average age possessing relatively non-transferable skills. Our workers and unions
18 FINANCIAL HISTORY | Fall 2026 | www. MoAF. org