The day that Nomura Holdings Inc. (TSE: 8604) unit Nomura Principal Finance Co. announced the sale of Japanese cutting tool maker Tungaloy Corporation to IMC International Metalworking Companies BV, managers at its unit, Iscar Ltd., celebrated the deal that they had dreamed of for years.
IMC, a unit of Berkshire Hathaway Inc. (NYSE:BRK.A), controlled by chairman and CEO Warren Buffet, will buy 71.2% of Tungaloy from Normura Principal and 19% from Tungaloy itself. Iscar honorary chairman Eitan Wertheimer confirmed that the $1 billion acquisition price reported in yesterday's media, "was more or less right".
As soon as the decision was made to sell, the deal was closed quickly, as is Iscar's wont. Wertheimer said, "We closed the deal in record time. Iscar president Jacob Harpaz and legal counsel Dan Goldman handled the deal perfectly. Three days ago, I told Warren Buffet that we were about to make the deal that we'd dreamed of, and which seemed imminent for the first time, but it was still a bird in the tree. Yesterday, it was already possible to cheer. He was very pleased. He trusts us and likes everything we do."
Wertheimer told "Globes" today, "It's very difficult to penetrate Japan. It's very different from other countries. They agree to link up with a Western company only if they trust it absolutely.
"Japan is a country where it's almost impossible for foreign businesses to enter. Things are carried out in the Japanese way, and they must be done in that way. It's necessary to understand that, in Japan, we're talking about companies where people come to work and live their whole working lives at one place. You have to reach their hearts and seek to walk together."
"Globes": How was the deal made?
Wertheimer: "We talked, we drank tea, ate biscuits, and closed the deal. With Tungaloy, an opportunity has suddenly opened and we jumped at it. It's an honor to work with this company. We've been trying to create ties with a Japanese company for a great many years. If there were other companies available, we'd be happy to buy them too. It's of supreme strategic importance for us to be a significant part of Japan and the Far East."
Was the deal leveraged?
"No. We funded it from our own resources."
Did Toshiba's sale of Tungaloy create the opportunity? Or was it the drop in the company's profits last year?
"Toshiba sold Tungaloy several years ago, so that was not a factor. By the way, Tungaloy's executives are Toshiba executives, and if they need a camera they'll only buy it from Toshiba. As for profits, they go up and down. Sometimes profits were strong and sometimes they were weak. Sometimes, one product sells less, but all in all this company has grown over the years.
"We're very pleased by Tungaloy's business and we'll keep it completely independent, under Iscar's umbrella. We have no intention of consolidating the companies. We want it just as it is - that's why we bought it."
Will this deal make you number 1 in Asia?
"I haven’t thought about it exactly, but it's something like that. We're strong in China and Korea, and now we're also strong in Japan."
Published by Globes [online], Israel business news - www.globes-online.com - on September 22, 2008
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