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Billionaire Buffett Acquires Remaining 20% of Israeli Based Booming Company

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Eitan Wertheimer, CEO of Iscar has just sold the remaining 20% stake in the company to billionaire investor Warren Buffett
Eitan Wertheimer, CEO of Iscar has just sold the remaining 20% stake in the company to billionaire investor Warren Buffett
On Wednesday, May 1, it was announced that billionaire Warren Buffett’s Berskshire Hathaway company acquired the remaining 20% stake in Iscar; an Israeli based company that specializes in the manufacture of metal cutting tools.

Back in 2006, Buffett made the biggest investment bet outside of the United States by plunking down a cool $4 billion for an 80% stake in Iscar; whose formal name is IMC International Metalworking Companies.

He purchased the company  from the Israeli-based Wertheimer family who went on to become one of the wealthiest families in Israel, when the 2006 sale of the 80% stake in Iscar to Buffett was announced only one day before Berkshire’s annual meeting that year.

Buffett’s interest in possessing sole ownership of Iscar is a clear indication that its value has since doubled since 2006. In a statement, Buffett said, “As you can surmise from the price we’re paying for the remaining interest, IMC has enjoyed very significant growth over the last seven years.”

In 2010, Buffett said he would like to invest more in Israel.

“We are always interested in more investments in Israel. We will be happy to acquire a large and independent company in Israel, or some small companies – what I call mergers into the existing framework and I think we will do both,” he said at the time.

According to media sources, the announcement of the 2013 acquisition came three days before over 35,000 people attended Berkshire’s annual meeting in its hometown of Omaha, Nebraska.

Buffett described Iscar as one of Berkshire’s five most profitable companies outside its insurance businesses, in his annual letter to shareholders on March 1.

Adding that he believes that Israel has a sustainable advantage in the global competitive market place, Buffett said, “If you are looking for brains – stop in Israel, there is no need to go further. If you go to the Middle East to look for oil, then skip Israel. In my opinion, Israel as a state has proven that it has an exceptional amount of brains and energy and in my eyes it works.”

Press reports reveal that as of a year ago, Buffett described Iscar’s management as “brilliant strategists and operators” in his annual shareholder letter.

Iscar ended 2012 with more than 11,900 employees.

The acquisition of the remaining stake in Iscar represents a real boon to the Israeli economy, as Israel will receive tax revenues of over 1 billion shekels according to combined media sources.

“The most respected and important investor in the world is voting with his feet,” said Eitan Wertheimer, chairman of the IMC group, which operates Iscar. “Israel is a good place to invest.”

Even after the acquisition, Wertheimer told reporters, the company will remain in Israel. “This isn’t easy for us but it’s the way of the world and it’s an opportunity to move the company forward,” said Wertheimer.

Iscar was founded in 1952 by Stef Wertheimer, who had been born in Germany. Since then, he has established a number of industrial parks in Israel aimed at promoting peace by having Jews and Arabs work together.

The law firm Wachtell, Lipton, Rosen & Katz advised the Wertheimer family on the Iscar transaction. The law firm of Munger, Tolles & Olson advised Berkshire.

When the acquisition was announced, Israeli Prime Minister Benjamin Netanyahu called Eitan Wertheimer and congratulated him on the deal. “Good job,” Netanyahu said, “This is a great honor for you and for Israeli industry. And also thank you on behalf of the government coffers.”

The tax receipt on the deal will help the Ministry of Finance to cope with the huge fiscal deficit and will go some way to alleviating the burden on the public.

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