Thursday, April 22, 2010

Buffett -- The Future is East

As if we did not know. As great as Buffett believes America to be, he also knows there is much greatness to tap in China. However, his excursion through the industrial world of China is to be guided by his Israeli ally, Eitan Wertheimer. Undoubtedly there is more prosperity ahead for those two and those who follow them.

Buffett’s Iscar Lured to China in Bid to Take Sandvik’s Lead

April 22 (Bloomberg) -- Iscar Metalworking Cos., the Israeli machinery maker owned by Warren Buffett, said it wants to make acquisitions abroad, with China the most likely market because of a lack of antitrust issues.

Iscar, the world’s second-biggest maker of metal-cutting tools, has ambitions to overtake global market leader Sandvik AB, Chairman Eitan Wertheimer said in an interview. A purchase “above a certain size” may prompt regulatory challenges in much of the world, though “China might be open,” and the takeover candidate would have to fit into strategy, he said.

Buffett’s self-described “travel agent,” Wertheimer, 58, plans a trip to the Far East with the Berkshire Hathaway Inc. chairman later this year to visit Japanese unit Tungaloy, a manufacturer of automotive and aerospace tools that Iscar bought in 2008 and is reorganizing. The purchase added capacity in Asia, where Iscar also has Chinese and South Korean plants.

“We are dying to buy, but there is very little variety around, and it has to be the right price,” Wertheimer said at his office in Herzliya, just north of Tel Aviv. An acquisition’s match with the company is important because “I don’t want to be big and stupid. I enjoy a lot to be the number two and be the smart guy. I want to be the Einstein of the field.”

Iscar, which has its headquarters in the northern Israeli town of Tefen, was founded by Eitan’s father Stef Wertheimer in 1952. It makes machine tools for the car-manufacturing and planemaking industries, and customers include Toyota Motor Corp. Berkshire paid $4 billion in 2006 for an 80 percent stake in Iscar, with Wertheimer’s family owning the remaining 20 percent.

Sales Recovering

The Israeli company’s sales are recovering, approaching the level of before the global recession started, with China, India and Korea leading the way and Europe lagging behind, Wertheimer said in the April 18 interview, declining to disclose details.

Gross domestic product in China rose 11.9 percent from a year earlier in the first quarter, according to the country’s statistics bureau. India’s economy in the year through March probably expanded 7.2 percent, the country’s Finance Ministry estimates. That compares with a 5 percent GDP contraction in 2009 for Germany, Europe’s biggest economy.

The recession led Iscar to shift to a four-day workweek for four or five months last year, allowing it to avoid firing any of its 10,000 employees, Wertheimer said. “We had to play for time to keep the people,” he said.

Wertheimer said he’s looking forward to “schmoozing” with Buffett about the planned visit to the revamped Tungaloy while attending Berkshire’s annual meeting on May 1 in Omaha, Nebraska. The Japanese trip would be the third that Wertheimer has helped arrange for Buffett, following a visits to China and South Korea in October 2007 and to Germany, Switzerland, Spain and Italy in May 2008.

Iscar is in a good position to expand through acquisitions, with the “combination of Eitan Wertheimer’s skill with Warren Buffett’s checkbook,” while industry earnings are below average levels, says Shai Dardashti, managing partner of New York-based Dardashti Capital Management, a Berkshire Hathaway investor.

Labels: , , ,


Post a Comment

<< Home