The Wertheimer family was prepared to sell all of Iscar Ltd. to Berkshire Hathaway Inc. (NYSE:BRK.A; BRK.B) in the present sale, had Berkshire chairman and CEO Warren Buffett demanded it, but he was happy to let the Wertheimers, whom he respects, keep 20% of Iscar.
When I asked Iscar president Jacob Harpaz what was the contractual status of this 20%, he said the Wertheimer family could sell the stake to a company other than Berkshire Hathaway, and that Berkshire Hathaway could decide to buy the stake from the Wertheimers at any time.
“Buffett initially wanted to insert into the contract a clause committing us to keep Iscar for a stipulated period, but he eventually realized that we were talking about people who were already committed to the company’s future, and there was no need for this,” said Harpaz.
When asked about the remaining 20% of Iscar, Berkshire Hathaway vice chairman Charles T. Munger said, “Berkshire has owned 80% of numerous companies for many years, and this may also be the case with Iscar.”
Buffett has big plans for Iscar. Iscar honorary chairman Stef Wertheimer today told Israeli correspondents that Buffett had already said he wanted to invest tens of millions of dollars in the company. Harpaz quoted Buffett as saying, “If you want to become number one, I’m prepared to back you, even if it means a large acquisition.” In other words, it is quite possible that Iscar is opening its wallet to go shopping.
Iscar is now number two in the metalworking tool industry, after Sweden’s Sandvik AB (SAX:SAND; LSE:SDF). Harpaz claims that Sandvik has a strong lead, and is even willing to cite a figure: approximately twice Iscar’s size. However, this figure cannot be used to derive Iscar’s sales, because Sandvik operates in a number of fields, whereas Iscar operates in only one.
Published by Globes [online], Israel business news - www.globes.co.il - on May 8, 2006
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