Berkshire Hathaway buys remaining stake in Iscar as earnings soar in first half of 2013
September 10, 2013
Warren Buffett’s Berkshire Hathaway Inc. (BHI) reported net earnings attributable to Berkshire shareholders of $9.433 billion in the first half of 2013, a 48% increase compared with the same period last year. BHI owns a number of diverse businesses including insurance, freight rail transportation, utilities and energy, finance, services and retailing, and manufacturing. The manufacturing arm of the company includes IMC International Metalworking Companies (Iscar), an industry leader in the field of cemented carbide (hardmetal) metal cutting tools. BHI chairman is billionaire Warren E Buffet with Charles T Munger acting as vice-chairman.
Investment in the cemented carbide sector
Warren Buffett made the decision to invest in the metal cutting tool sector seven years ago when BHI bought 80% of IMC (Iscar) for around $5 billion from the Wertheimer family which founded the business in Israel 60 years ago. It was the first acquisition by BHI outside of the United States. The Israeli carbide producer based in Tefen, northern Israel, soon made positive contributions to BHI financial results. Although IMC is not obliged to make public its financial results, it is estimated to have achieved sales of more than $3 billion in 2011 with profits close to $1 billion, more than twice what they were in 2005.
BHI had in the meantime added a number of other leading cemented carbide producers to the IMC stable: notably Ingersoll (USA), Metaldur (Switzerland), Microtools (Israel), Outiltec (France), UOP Spa (Italy), TaeguTec (Korea) and Tungaloy (Japan). Today the IMC group has over 10,000 employees in 140 subsidiaries in 61 countries.
In May 2013 Berkshire Hathaway purchased the remaining 20% shareholding in Iscar for a quoted $2.05 billion giving the Israeli company a total valuation of around $10 billion. “Since the time IMC entered our lives, my partner Charlie Munger and I have enjoyed Berkshire’s association with the company, the Wertheimer family and the company’s management team,” stated Buffett at BHI headquarters in Omaha, Nebraska.
“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, and we are delighted to acquire the portion of the company that was retained by the Wertheimer family when IMC first became a member of the Berkshire group of companies.
We look forward to continuing our stewardship of this unique company founded by the Wertheimer family in Israel 60 years ago and nurtured into a truly global enterprise,” Buffett said in the statement.
Eitan Wertheimer stated, “We are very pleased that IMC has found a permanent home in Berkshire Hathaway, which fully appreciates the unique nature of the global Israeli enterprise that we have created and that is committed to remaining true to that heritage in every way, building on and continuing our historic success and special culture. The growth experienced by IMC since the 2006 Berkshire transaction validates the faith that Warren [Buffett] and Charlie [Munger] showed in our business and the special people in Tefen, Israel and around the world who have made our success possible.”