The indication is certainly there, however i do not think DFNS is on the top of his list,
Eitan Wertheimer: Buffett eager for more Israeli cos
Following the sale of 80% of Iscar to Buffett for $4 billion, Wertheimer said, “ the deal took 10 minutes to close; we'll pay 25% tax." Gali Weinreb, Omaha, Nebraska 7 May 06 13:35 Eitan Wertheimer, the 53 year old son of Stef Wertheimer and president of the business empire his father built, will become one of Israel’s richest men, following the acquisition of Iscar by Warren Buffett. In an interview with “Globes” in Omaha, Nebraska, Wertheimer explains what led Buffet to acquire Iscar and talks about whether he will be likely to follow this with acquisitions of other Israeli companies. Globes: Do you believe Buffet will make a further acquisition in Israel in the near future?
Wertheimer:” Buffett told me he is waiting for calls from Israeli companies that meet his criteria like a 16 year-old girl waiting for a call from her first date.”
Are there any other Israeli companies that meet those criteria?
”There are a number, although these are not necessarily public companies that are always in the news, and not necessarily companies the size of Iscar, but also $50 million companies.”
Why did you chose to sell the company to Buffett, rather than make an IPO?
”If money was our only consideration, we could have got more from an IPO, a buy-out, or a merger with competitors in the industry, but Buffett gave us the feeling of the best fit since he generally does not interfere in the management of companies he invests in. This will enable us to continue running the company as we have done up to now.”
If the company is so successful, why did you sell?
”We felt we had reached a point where bringing in a partner into the company would help it grow. Cooperation with Buffett will help the company with its and also enable us to acquire further companies. Take for example the US automobile industry, which is a very important target for Iscar. It is an extremely closed community that likes working with US enterprises and it will therefore be happy to work with Buffett’s Berkshire Hathaway Group (NYSE: BRK.A and BRK.B).”
The sale process began back in October 2005, when Iscar learned was told by someone close to it that “there is someone in the US who does things differently.” Wertheimer did some checking of his own and found out that this was indeed correct. Iscar wrote to Buffett enclosing its summary financial data. The reply came back within a matter of hours.
Soon after, Iscar representatives met with Buffett and then his business partner Charles T. Munger, who gave them a cold shower, which it later transpired was a test of the company’s resilience. Munger now describes them as “not unwise”, something which is considered a compliment from someone like him.
Wertheimer made several more visits to the US. He claims the deal was closed in a private meeting with Buffett on March 22, which lasted 10 minutes. “Buffett said he wanted to complete the process by May 6, the date of Berkshire Hawathay’s investors’ meeting, and this led to the whole process being speeded up.”
Buffett didn’t bother to come to Israel to learn more about Iscar and was satisfied with his meeting with the company management. He did, however, make an in-depth study of the company’s financial data and Wertheimer notes that “he knew more about the details than anyone.” Wertheimer adds that Buffett was especially interested to learn about the company’s stable growth during the last 20 years as well as its financial ratios.
The Wertheimer family has a longstanding policy of jealously guarding against disclosure of financial data about Iscar. They claimed that the company’s size and financial reporting method made it impossible to disclose specific data about Iscar, without such data becoming common knowledge. Berkshire Hathaway reports on the sectors it invests in and has plenty of activities in Iscar’s sector but even they couldn’t find out about its financial performance.
Why have you avoided disclosing Iscar’s data?
”Any figure will constitute a weapon for our competitors.”
Under the agreement between Buffett and Iscar, the company will retain its current employees and also recruit additional staff, especially engineers. The existing management team will also be retained.
What do you plan to do with the money you have received?
”Some of the money will be channeled into new businesses and some will be appropriated for non-business activities. If Iscar needs a further investment, this may also be financed from these funds. Bear in mind that the sum in question is $4 billion of which $3 billion will be left after taxes”.
In 1997, Wertheimer acquired Discount Investment Corporation (TASE: DISI)’s stake in Iscar at a company value of $800 million. Wertheimer claims that the substantial increase in value since then (to $5 billion today) was due primarily to the company’s growth during the last nine years.
”They were good partners for many years,” says Wertheimer about the painful and historic parting of company with IDB. “At a certain stage, the management changed and the new people did not understand anything about entrepreneurship, so we had to go our separate ways. IDB has companies in its group that have entrepreneurial flair and could be even more successful if IDB was more open to entrepreneurship companies such as Scitex (Nasdaq: SCIX; TASE: SCIX).”
Published by Globes [online], Israel business news - www.globes.co.il - on May 7, 2006
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