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Buffett Wins the Pritzkers' Prize

Berkshire Hathaway agrees to acquire the Pritzker family's Marmon Holdings, which comprises more than 125 businesses

By BW Staff with the Associated Press

Marmon Holdings has always been the quiet part of the Pritzker empire. As the Pritzker family of Chicago became one of the wealthiest in the country under the leadership of Jay Pritzker, it was better known for the Hyatt Hotel chain and a variety of real estate developments around the country. But the privately held Marmon, a holding company long managed by Jay's brother Bob, was always a significant part of the empire, often contributing more than half of the revenues.

Now, Warren Buffett is ending the era of Pritzker ownership at Marmon. On Christmas Day, Dec. 25, Buffett's investment company said it will acquire Marmon in a deal structured to transfer ownership over several years. Berkshire Hathaway (BRKA) will pay $4.5 billion for 60% of Marmon and then an unspecified amount for the remaining 40% over the next five to six years, depending on the future earnings of Marmon. "Our transaction was done just the way Jay would have liked it to be done—no consultants or studies," said Buffett in a statement.

A Family Business

Marmon has improved its performance in recent years. The holding company, with more than 125 manufacturing and service businesses, hit a rough patch at the beginning of the decade as the economy softened. But in 2006, the company says revenue increased 24%, and now totals about $7 billion, while operating income surged 73%. (Because Marmon is privately held, it does not have to provide detailed financial statements to the public.)

Marmon is owned by trusts for the benefit of the Pritzker family, which also developed the Hyatt Hotel chain.

The Buffett deal is expected to close in the first quarter of 2008. Before the closing, Marmon will make a "substantial distribution of cash and certain assets to the selling shareholders," according to the statement.

The Pritzker family went through unsual tumult in recent years. In 2002, the daughter of Bob Pritzker, Liesel, sued her father and cousins alleging they had misused money from trusts set up to benefit her and her brother, Matthew. The lawsuit was settled in 2005, with Liesel and Matthew each receiving $280 million in addition to money they had previously been given.

Six Years in the Making

Marmon was acquired by the brothers Jay and Robert Pritzker in 1953 when it was a small manufacturing operation in Ohio. In 2002, Jay's son Tom Pritzker took over as chairman. Tom then recruited John Nichols to become chief executive of Marmon, and in 2006, John was succeeded by Frank Ptak, Marmon's current CEO.

"This transaction is the culmination of a process that began six years ago," said Tom Pritzker in a statement. "We brought John Nichols in as CEO and began rebuilding Marmon's existing lines of business. Berkshire Hathaway's decision recognizes the fine work of our management team over this period and the transaction is being done in the context of the previously reported restructuring of our family business interests."

No Management Change Expected

Under the agreement, Marmon's management will continue to oversee the business in the immediate future.

"This is a transaction that works for all stakeholders," said Nichols in a statement. "It will allow Marmon to thrive under its existing management team and continue implementing our management philosophy."

Buffett is the billionaire CEO and chairman of Berkshire Hathaway, which has more than 60 subsidiaries. He's known for a hands-off management style, as long as his companies are operating smoothly. "I am pleased that over the next five to six years, we will be partnering and working with Tom Pritzker, John Nichols, and Frank Ptak in continuing to build Marmon," said Buffett.

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