Warren Buffett, right, and Eitan Wertheimer, chairman of the board of Israeli metal working company Iscar. (Photo: AP)Immediately after making the largest ever buyout of an Israeli company when he acquired Israel’s Iscar Metalworking Cos. for $4b in May, American …
Next week he’s making good on the promise with a lightning two-day trip in which the 76-year-old businessman listed by Forbes as the second richest man in the world behind Bill Gates with an estimated worth of $42 billion, will visit Iscar, the industry leader in metal cutting tools, which he purchased from the Wertheimer family in May without ever having seen it.
Tefen-based Iscar is the first company Berkshire Hathaway, the investment and insurance company owned by Buffett, has purchased which is based outside the US. Tefen, near Carmiel in northern Israel, is in an area that was hard hit by rockets fired by Hizbullah during more than a month of fighting that ended on Aug. 14.
As part of his tour, Buffett will also pay a visit to Haifa’s Rambam Hospital to visit Israeli residents still hospitalized from katyusha attacks during the war. He’ll also meet with Prime Minister Ehud Olmert.
Founded in 1952 by industrialist Stef Wertheimer to manufacture metal cutting tools, Iscar has in the past decade turned into a major player with subsidiaries in 60 countries and factories in Europe, Asia, and the Americas. The company specializes in precision tools for the automotive, aerospace, and die-and-mold industries. Today, Iscar Manufacturing’s main products are precision carbide metalworking tools.
When he announced the deal last spring, Buffett called it a “top performer in its industry.” It operates in Europe, Asia, Latin America and North America, where Buffett is planning to expand its operations.
“I think you’ll look back on this in five or 10 years as a significant event in Berkshire history,” he said.
A day after the acquisition, Wertheimer’s son Eitan, 53, who has gradually taken over day to day management of the family-owned company, stood before shareholders at the Berkshire Hathaway annual meeting in Omaha, Neb., and declared: “We, our families, all the Iscar employees and their families are proud to join you.”
“As a member of the Berkshire family we’ll have the benefit of a strong platform that’s committed to continuing our historical success,” said Wertheimer. “This transaction is not only significant for our company, our customers and our employees, but also for our industry, and for the State of Israel. We are gratified by Berkshire’s investment in the group, and proud of what we have achieved since Iscar’s founding more than 50 years ago by my father Stef Wertheimer, who will continue to lend his vision to the group. We are looking forward to a long and profitable partnership with Berkshire Hathaway.”
In recent years, the elder Wertheimer has focused on using his business success to promote Middle East peace through industrial parks modeled after Tefen and four others he has built in Israel. Wertheimer, 80, believes industry is the key for creating jobs and stability in the region, and said that the main objective of the deal was to expand industry in the Galilee. A project of his for over 25 years, has created a set of industrial parks in Israel, all with an integrated Israeli and Palestinian workforce, to promote export businesses, create jobs, and reduce gaps in living standards.
In 2002 Wertheimer testified before Congress about his idea for a “new Marshall Plan” that advocates US funding to revitalize the Middle East, a plan he still champions in speeches across the world.
Wertheimer’s model park is the Tefen industrial park where Iscar is located. Built in 1982, it encompasses everything from transportation to cultural and educational facilities. Tefen is one of four such parks in Israel that generate some $1 billion in combined revenue. The others are located in nearby Lavon, Tel Hai (further north) and Omer, near Beersheba, in the south. Not only is Tefen the site of Wertheimer’s own company, but also over 20 other export oriented companies.
“At Tefen and the three other industrial parks I built 20 years ago in the Galilee and Negev, we’ve shown how an integrated workforce – Jews, Arabs and Druze working together – can make a difference,” Wertheimer told the Fast 50 website.
Olmert praised the deal at the time as “an amazing statement about the Israeli economy” that “ought to generate great enthusiasm.” He added: “There is no other investor in the world who can say, ‘What’s good for Warren Buffet isn’t good for me.’”
Vice Prime Minister Shimon Peres called Stef Wertheimer after the deal was announced and told him that, “this transaction reflects foreign investor confidence in Israel’s economy, and especially in the economic future in the Galilee.”
With the recent deal, Peres, who is responsible for Israel’s economic relations with her neighbors as well as Negev and Galilee Development, added, “A tremendous opportunity has now presented itself to continue boosting all aspects of Galilee development” and that “the most important asset that Israel possesses is its human resources.”
Peres added that Iscar’s sale would indeed encourage other investors and entrepreneurs from Israel and abroad to invest in the Galilee region, a “region not only blessed with pastoral beauty and holy sites, but also hi-tech, a future first class university and a wealth of human potential, all of which render the Galilee one of Israel’s key economic magnets.”
In view of Iscar’s acquisition, and the interest of various entrepreneurs to explore tourist and business-oriented projects in the the Galilee and the Negev, Peres noted, that both these regions have become “fertile ground for establishing and cultivating thriving business operations in Israel.”