← Back to Explore
ENTITY
🕰3 min read
🎵Wisdom Density:
Moderate
🧭21 concepts
👁 -- readers

ISCAR

ISCAR Metalworking is an Israeli manufacturer of small, consumable precision cutting tools — inserts, blades, drills, and milling tools used with large machine tools in metalworking. Acquired by Berkshire Hathaway in 2006, ISCAR became Berkshire's first foreign-headquartered business and the defining proof of the "Buyer of Choice" thesis going global.

📝 The Acquisition (2006)

  • Structure: Berkshire acquired 80% of ISCAR for approximately $4 billion on July 5, 2006. The Wertheimer family retained the remaining 20%.
  • Origin: In October 2005, Eitan Wertheimer sent Buffett a 1¼-page letter with no bankers, no auction, no intermediaries. "Character and talent just jumped off the page at me," Buffett said.
  • Due Diligence: Jacob Harpaz (CEO) and Danny Goldman (CFO) flew to Omaha in November 2005. Buffett visited Israel in September 2006 with a delegation of Berkshire directors. His assessment: "We — every one of us — have never been more impressed with any operation."
  • The Filter: ISCAR explicitly rejected the auction process. The Wertheimers cared too much about their employees and business culture to accept the highest bid. This self-selection is the core of Berkshire's Buyer of Choice thesis.

📝 The Business

  • Products: Consumable cutting tools — the "blades" that are worn away during precision machining and must be regularly replaced. High-repeat-purchase, technically demanding.
  • Strategy: "We are not only selling tools, we are selling technology. We are selling the customer a better way to make profit." — Jacob Harpaz
  • Scale: By 2006, ISCAR had operations in 61 countries worldwide, making it a genuinely global manufacturing brand.
  • Economics: Low fixed-cost base relative to revenues; high customer loyalty due to precision engineering and technical support relationships; pricing power through technological differentiation.
  • Competitive Position: Considered among the top two or three cutting-tool manufacturers in the world.

🚀 2010: The Rebound

In 2010, as global manufacturing rebounded from the Great Recession, ISCAR's profits rocketed 159%. This spectacular performance further cemented it as one of Berkshire's "Big Four" non-insurance operations.

📝 Shareholder Meeting Introduction (2006)

At the 2006 annual meeting, Eitan Wertheimer and Jacob Harpaz addressed 24,000 Berkshire shareholders — the first international acquisition leadership team to do so. Wertheimer: "I'm standing here before you representing 5,869 people — not only the people, but the families, their past and their future." Munger: "The average quality of the people in this company is not only extraordinary, it's off the chart."

💰 2013: 100% Acquisition

  • The Deal: Berkshire acquired the remaining 20% of ISCAR (IMC) from the Wertheimer family for $2 billion, setting the implied valuation of the enterprise at roughly $10 billion.
  • The Bolt-On Logic: Buffett noted this as a premier example of a bolt-on acquisition—buying more of a company they already understand intimately, run by a manager (Jacob Harpaz) they already trust implicitly.

🔗 Connections

📚 Historical Mentions & Citations (8)

Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.

📜
2005 LetterReference Only
▼

Mentioned in this document.

View Source Digest →
📜
2006 LetterExcerpt Available
▼
The highlight of the year, however, was our July 5th acquisition of most of ISCAR, an Israeli company, and our new association with its chairman, Eitan Wertheimer, and CEO, Jacob Harpaz. The story here began on October 25, 2005, when I received a 1¼-page letter from Eitan, of whom I then knew nothing. The letter began, “I am writing to introduce you to ISCAR,” and proceeded to describe a cutting-tool business carried on in 61 countries. Then Eitan wrote, “We have for some time considered the issues of generational transfer and ownership that are typical for large family enterprises, and have given much thought to ISCAR’s future. Our conclusion is that Berkshire Hathaway would be the ideal home for ISCAR. We believe that ISCAR would continue to thrive as a part of your portfolio of businesses.” Overall, Eitan’s letter made the quality of the company and the character of its management leap off the page. It also made me want to learn more, and in November, Eitan, Jacob and ISCAR’s CFO, Danny Goldman, came to Omaha. A few hours with them convinced me that if we were to make a deal, we would be teaming up with extraordinarily talented managers who could be trusted to run the business after a sale with all of the energy and dedication that they had exhibited previously. However, having never bought a business based outside of the U.S. (though I had bought a number of foreign stocks), I needed to get educated on some tax and jurisdictional matters. With that task completed, Berkshire purchased 80% of ISCAR for $4 billion. The remaining 20% stays in the hands of the Wertheimer family, making it our valued partner.
View Source Digest →
🎙️
2006 MeetingExcerpt Available
▼
WARREN BUFFETT: But what did happen, and which we announced last night — which was very important — the acquisition of a large, extremely well-managed, profitable, really extraordinary company called ISCAR. And up until October of last year, I knew nothing of ISCAR. I did not know about their extraordinary management. But I got a letter, and I got a letter from Eitan Wertheimer, and — maybe a page and a half, page and a quarter — and he told me something about this business. And sometimes character and talents sort of just jump off the page at me, and this was one of those letters, and it came from Israel. And I expressed an interest, after reading this letter, in getting together with Eitan. And not long thereafter, I met not only Eitan, but his CEO and president, a remarkable man named Jacob Harpaz; Danny Goldman, the CFO. And we met in Omaha. They subsequently met Charlie. And this all came to fruition yesterday when we signed a contract. Now we have — well, before I go on to this, maybe Charlie would like to say a word or two about ISCAR. CHARLIE MUNGER: Well, this is a company that, from very modest beginnings, grows to be the best company in its field in the world. It’s not yet the biggest, but that leaves them something to do. The average quality of the people in this company is not only extraordinary, it’s off the chart. And the beauty of this, as you look at the two of us, is they’re all young. No, this is a real quality enterprise, and these people know how to do some things that we don’t know how to do. A lot. So, of course we’re enthusiastic about the company. I’m always enthusiastic when I get to deal with some of the best people in the world. I would like if we could get the spotlight down there. They’re right down here in front. I would like, individually, three managers to stand up. And then Eitan is going to talk to us a bit, and then we have a — I think we’ve got it arranged so that we can have a short movie that will tell you something about ISCAR.
View Source Digest →
📜
2007 LetterExcerpt Available
▼
Turning to happier thoughts, we can report that Berkshire’s newest acquisitions of size, TTI and Iscar, led by their CEOs, Paul Andrews and Jacob Harpaz respectively, performed magnificently in 2007. Iscar is as impressive a manufacturing operation as I’ve seen, a view I reported last year and that was confirmed by a visit I made in the fall to its extraordinary plant in Korea. Iscar continues its wondrous ways. Its products are small carbide cutting tools that make large and very expensive machine tools more productive. The raw material for carbide is tungsten, mined in China. For many decades, Iscar moved tungsten to Israel, where brains turned it into something far more valuable. Late in 2007, Iscar opened a large plant in Dalian, China. In effect, we’ve now moved the brains to the tungsten. Major opportunities for growth await Iscar. Its management team, led by Eitan Wertheimer, Jacob Harpaz, and Danny Goldman, is certain to make the most of them.
View Source Digest →
🎙️
2007 MeetingExcerpt Available
▼
The residential constructionrelated businesses are getting hit, in some cases getting hit very hard, and in some cases getting just — but still reflecting decreases in their business. And my guess is that that continues, perhaps, for quite a while. So you will see lower earnings coming from the companies that are related to residential construction such as Shaw, Johns Manville, ACME Brick, and that group. But overall, compared to the companies they compete with, our managers continue to do an absolutely sensational job. We have the greatest group of managers and, for that matter, we’ve got the greatest group of stockholders, of any company I know of in the world, and Charlie and I are very grateful. You saw in the movie Charlie and I going over there to give the fellows in Israel a lot of advice on how to run their operation better. And Charlie might want to — you might want to comment on ISCAR. CHARLIE MUNGER: Well, that was a great experience, and ISCAR is a very great company. I have never seen anything as automated as that ISCAR operation. I think they regard it as a disgrace if any human hand has to do anything.
View Source Digest →
📜
2010 LetterExcerpt Available
▼
Next to Marmon, the two largest earners in this sector are Iscar and McLane. Both had excellent years. In 2010, Grady Rosier’s McLane entered the wine and spirits distribution business to supplement its $32 billion operation as a distributor of food products, cigarettes, candy and sundries. In purchasing Empire Distributors, an operator in Georgia and North Carolina, we teamed up with David Kahn, the company’s dynamic CEO. David is leading our efforts to expand geographically. By yearend he had already made his first acquisition, Horizon Wine and Spirits in Tennessee. At Iscar, profits were up 159% in 2010, and we may well surpass pre-recession levels in 2011. Sales are improving throughout the world, particularly in Asia. Credit Eitan Wertheimer, Jacob Harpaz and Danny Goldman for an exceptional performance, one far superior to that of Iscar’s main competitors.
View Source Digest →
🎙️
2010 MeetingExcerpt Available
▼
WARREN BUFFETT: Now, before we start with the questions, we do have preliminary earnings figures for the first quarter. And I’d like to ask the projectionist to put up slide A. There’s nothing really very surprising in these numbers, but we’d like to give them to you. They up there OK? Yeah. If you have any questions on these later on. What we’re seeing in our businesses is that, in what was sort of a sputtering recovery a few months ago, seems to have picked up steam in March and April. And our businesses that kind of serve broad industry, such as the railroad or Marmon or ISCAR, we’re seeing a pretty good uptick. It’s a long way from where it was a couple years ago, but what was very spotty in the recovery a couple of months ago, the trends really seem a fair amount stronger in the last few months. And we always encourage you to focus on operating earnings. We have the figures there for our investments and derivative businesses. We don’t really think they mean anything on a quarterly basis. Obviously, they’re meaningful over the years. AUDIENCE MEMBER: It’s about Greece, the future of the euro, and the fiscal discipline all over the world, and what we have to prepare for as investors. In the past, you have been warning us about structural weaknesses of the U.S. dollar. Now we see Greece, and potentially other European countries, in crisis. Berkshire has significant investments in the eurozone, the big ones like Cologne Re, Munich Re, and even small ones like ISCAR’s (inaudible) in Hamburg. How are you preparing Berkshire Hathaway for potential currency failures? And what are your thoughts on the sustainability of the euro? And what is your advice for us as investors?
View Source Digest →
📜
2013 LetterExcerpt Available
▼
Berkshire’s gain in net worth during 2013 was $34.2 billion. That gain was after our deducting $1.8 billion of charges — meaningless economically, as I will explain later — that arose from our purchase of the minority interests in Marmon and Iscar. After those charges, the per-share book value of both our Class A and Class B stock increased by 18.2%. Over the last 49 years (that is, since present management took over), book value has grown from $19 to $134,973, a rate of 19.7% compounded annually.* MidAmerican is one of our “Powerhouse Five” — a collection of large non-insurance businesses that, in aggregate, had a record $10.8 billion of pre-tax earnings in 2013, up $758 million from 2012. The other companies in this sainted group are BNSF, Iscar, Lubrizol and Marmon.
View Source Digest →