DALIAN, China - "Iscar is a
dream deal. It has surpassed all the
expectations I had when buying the company, and
my expectations had been very high." Thus Warren
Buffett yesterday, a year and a half after
buying the 80 percent controlling interest in
the northern Israeli blades technology maker
from the Wertheimer family for a cool $4
billion. The acquisition, closed in May 2006,
had been Buffett's first outside the United
States.
Yesterday the man also known to the global
investment community as the "Oracle of Omaha"
for his brilliance in investing granted an
exclusive interview to TheMarker on the occasion
of his visit to Dalian, China's northernmost
ice-free seaport, to inaugurate a vast Iscar
Metalworking production plant in the city. Iscar
also owns production facilities in South Korea.
All the people at his company, Berkshire
Hathaway, feel the same positive way he does
about Iscar, Buffett says. "Since I met Eitan
Wertheimer and acquired Iscar, the people at
Berkshire Hathaway think I'm a lot smarter," he
quips.
 |
This is not a man who leaves
the United States a great deal. He's only
visited China once before, 12 years ago, on
vacation with his wife and with Bill and Melinda
Gates. Despite China's increasing dominance in
the global business scene and financial markets,
neither couple visited the vast country again,
until now. And the only reason he came this time
is to open the Iscar plant in Dalian, he avers.
"The moment Eitan suggested that I come here, I
said I'd come."
How has Iscar done since he acquired the firm?
"Next week I have a board meeting in Columbus,
Ohio," Buffett answers. "Only three Berkshire
Hathaway companies will be making presentations
there: two insurance companies and Iscar." And
when the people from Iscar make their
presentation, says the Oracle, the buttons are
going to burst right off his shirt because he'll
be so puffed with pride about that deal.
Neither Iscar's people nor its owner will
divulge a thing about the company's financials.
But TheMarker can do math and estimates that the
year 2007 was one of the best in the company's
history, partly because of roaring demand for
its blades technology in the giant emerging
markets of Russia, India and China itself. The
company's sales apparently passed $1.5 billion
and it is estimated to be clearing between $450
million to $500 million this year.
One indication of how extraordinarily profitable
Iscar is, is the decision by the Berkshire
Hathaway accountants to classify Iscar, in the
parent company's consolidated financial
statements, as a company with substantial impact
on the group. Now, Berkshire Hathaway's market
capitalization on Wall Street is about $200
billion and it nets $12 billion a year. That
means Iscar is producing big figures.
Asked if he got a good price on Iscar given its
financial results, Buffett does not hold back:
he made an excellent deal, but so did the
Wertheimers, he qualifies. "They didn't want to
sell the company like a piece of meat on the
market. They wanted people who would let them
work, who view life much the same way. I got
exactly what I wanted and I think they did,
too."
It's like a marriage, Buffett enthuses: after
three months, you find out if it's better or
worse than you thought it would be. His union
with Israel's Iscar is better than he'd
anticipated, he says.
What are his expectations for the long run?
"This company could become a lot bigger than
people imagine," he says simply.
Buffett famously avoids giving forecasts about
stocks. He prefers to confine his attention to
picking companies. But in answer to TheMarker's
question about the subprime mortgages crisis in
the U.S., which set off a crisis squeeze around
the world, he says with certitude: it isn't over
yet. "There will be more pain," says Buffett. He
can't predict if the problems will infect other
areas, but it would be stupid to assume that
they won't spread: "A lot of people won't be
able to pay the mortgages they took out."
Regarding Chinese stocks, which have more than
doubled in price in the last year, Buffett
rather set a cat among the pigeons, counseling
the investment community to tread cautiously
regarding Chinese stocks. Chinese share prices
look pricey, he hinted, noting that his policy
is never to buy stocks when he sees prices
soaring.
Buffett added that just this month Berkshire
Hathaway sold its holding in PetroChina, listed
in Hong Kong, which mushroomed in market
capitalization to become the second-biggest
company in the whole world.
Warren Buffett, widely believed to be one of the
best investors in the world, counsels you: look
very carefully at what you're getting for your
money. |
