Thursday, September 21, 2006

Warren Buffett Visits His Israeli Acquisition


Back on July 5th, when Berkshire Hathaway, Warren Buffet's holding company, announced that it had acquired 80% of Iscar, an Israeli prescision cutting tool manufacturer, for a whopping four billion dollars--its very first acquisition of a company headquartered outside the United States--there were no doubt those in the investment community who clucked their tongues and questioned whether Mr. Buffet was exercising due caution in light of the volatile security situation in Israel. When hostilities broke out on the Israeli-Lebanese border just seven days later, those same skeptics probably considered that events had borne out the validity of their suspicions. After all, Iscar is located only 8 miles from the Israel-Lebanon border, and 4000 Hezbollah rockets rained down on Northern Israel during the month-long fighting. Moreover, the prospects for renewed warfare are very real.

As reported here by USA Today, Mr. Buffet was fazed neither by the war nor by his potential critics. Following his first visit to see the company--Berkshire Hathaway had purchased it sight unseen--Mr. Buffet told reporters:

"I knew where it was when we bought it. What you have here is a remarkable group of people doing remarkable things in their field, achieving terrific results all over the world from here, based right here, eight miles from the Lebanese border."

Buffett said that while another frontier flare-up is possible, the region is fundamentally no riskier than any other. "Over the long term, the United States and Israel, have exactly the same risk," he said. "We live in a dangerous world."

Ha-Aretz reports that the well-known Buffett wit was on display when the master investor spoke at a dinner in his honor at Jerusalem's King David Hotel. He remarked, "We paid $4 billion for a company we never saw. Now I am happy to report that there really is a factory there."

Mr. Buffett also reflected on why the Iscar acquisition fit in with the Berkshire Hathaway investment philosophy, stating, "Our business trick is not to try to be a genius but to find geniuses to partner with and then try not to interfere with them in business. A lot of Americans went looking for oil in the Middle East, but they didn't stop here. We were looking for brains, and came straight to Israel."

The caption in USA Today for the photograph above states: "Warren Buffett, wearing a traditional Druze cap given to him by an unidentified Druze man, visits the Iscar Metalworking headquarters. Behind him is Iscar founder Stef Wertheimer." However, having seen both Druze and Bukharian hats first hand, I would say that the hat is Bukharian. Bukharian Jews from the Central Asian regions of the old Soviet Union, have immigrated to Israel, beginning back in the 1970s.

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