Berkshire Hathaway Inc. (BRK/A) agreed to pay $2.05 billion for the 20 percent of IMC International Metalworking Cos. that it doesn’t already own as Chairman Warren Buffett expands his bet on the Israeli manufacturer.
IMC, known as Iscar, makes cutting gear for industries including aerospace and auto manufacturing. Jacob Harpaz will remain chief executive officer of Tefen, Israel-based IMC, the companies said today in a statement.
Buffett has structured deals to buy Marmon Holdings and IMC to allow the selling families to retain a stake in the companies they built. Omaha, Nebraska-based Berkshire can then increase its ownership with the price based on the results after the initial deal. He said in 2006 that he bought 80 percent of Iscar in a transaction that valued the company at $5 billion.
“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,” Buffett, 82, said in the statement.
Iscar had 11,933 employees at the end of last year, compared with 6,518 six years earlier, according to Berkshire’s annual reports. The company has been bolstering operations in Asia, including at its Tungaloy unit in Japan. Iscar has also invested in TaeguTec Ltd., a cutting-tools maker based in South Korea.
Berkshire said in its most recent annual report that revenue declined last year as demand weakened outside the U.S. Still, Buffett counts Iscar among Berkshire’s “powerhouse five” non-insurance operations, including Marmon, the Burlington Northern Santa Fe railroad, Lubrizol and MidAmerican Energy. The group had aggregate earnings of $10.1 billion last year, up about $600 million from 2011.
“Unless the U.S. economy tanks -- which we don’t expect -- our powerhouse five should again deliver higher earnings in 2013,” Buffett wrote in a letter to shareholders in March. “The five outstanding CEOs who run them will see to that.”
Eitan Wertheimer, who sold the company to Berkshire in 2006, has described himself as Buffett’s “travel agent” and accompanied the billionaire on meetings with business owners in Asia, Germany, Italy, Switzerland and Spain as Berkshire hunts for acquisitions.
Berkshire “fully appreciates the unique nature of the global Israeli enterprise that we have created, and that is committed to remaining true to that heritage,” Wertheimer said.
Buffett who hosts Berkshire’s annual meeting May 4, has been searching for ways to deploy a cash hoard that stood at $47 billion at the end of 2012. He subsequently committed about $12 billion in February in a deal with Jorge Paulo Lemann’s 3G Capital to take HJ Heinz Co. private. That transaction was approved by shareholders of the ketchup maker yesterday.
Berkshire climbed 19 percent this year through yesterday in New York trading. The shares closed at a record $161,025 on April 25.
Wachtell, Lipton, Rosen & Katz provided legal advice to the Wertheimer family and IMC, according to the statement. Berkshire was advised by Munger, Tolles & Olson LLP.
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