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A Purchase That Shook the World: Top U.S. Investor Buys Israeli Firm

May 8, 2006
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It’s not every day that a private investor gets to influence the course of a country’s economy. But that’s just what American tycoon Warren Buffett might have done by buying an 80 percent share in Israeli metalworks conglomerate Iscar over the weekend for a record $4 billion.

Israeli media described it as the “deal of the decade.” Given the windfall for the new government of Prime Minister Ehud Olmert, one newspaper suggested income tax could even be lowered in the future.

“This is major news and a great present for the State of Israel,” Olmert said.

“This is not just another deal worth billions. Here we have the world’s greatest investor — not a Jew, nor a Zionist — who is making a vote of confidence in the State of Israel’s economy.”

In another show of strength, the Cabinet approved Israel’s 2006 state budget. The $64 billion package, which must now pass three Knesset votes, had been held up by infighting under the previous Sharon government.

News of the Buffett buy came as the world’s second-richest man made a rare appearance at an Omaha meeting of his company, Berkshire Hathaway.

Buffett is considered a prudent investor who seeks companies with the idea of realizing their growth potential, rather than stripping and reselling them. Iscar’s president and chairman, Eitan Wertheimer, said this approach was key to closing the deal.

“We studied his practices with other companies,” Wertheimer told Israel’s Army Radio. “He bought and did not sell. He did not interfere with everyone who wanted to work. He did not go public with a company that was not already being traded. And he respected people who knew what they were doing.”

Wertheimer, who maintains a 20 percent stake in Iscar, described the sale as a world-first for Buffett.

“This is the first time that Warren Buffett has bought a company whose headquarters is not in America,” he said.

And there may be more of the same. Ma’ariv quoted Buffett, who has yet to visit the Jewish state, as saying: “I plan further acquisitions of Israeli companies in the future. I believe in the Israeli market and the Israeli economy and I think now is a good time to invest here.”

Iscar was founded in 1952 by immigrant Stef Wertheimer as a modest metalworks shop in Nahariya. It now competes for major defense contracts and boasts facilities in the United States, Brazil, China, Germany, India, Italy, Japan and Korea.

The Buffett buy propelled the already-wealthy Wertheimer family to the top of the list of Israel’s richest. With recent public-sector cuts still being felt among Israel’s poor, newspaper reports noted that the proceeds of the sale could, in theory, be used to boost welfare benefits or expand the basket of medicines covered by national insurance.

Wertheimer said he hopes the estimated $1 billion in taxes he will pay will be used to such ends. His family is also expected to expand its investment in underprivileged areas of Israel such as the Galilee.

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