Berkshire buys 80% of a metal company

Berkshire Hathaway Inc. on Friday agreed to buy 80 percent of family-owned Iscar Metalworking Cos. in a transaction that values the company at $5 billion. Separately, Berkshire Hathaway said first-quarter profit jumped 70%, as the company's insurance units earned more from investments and Buffett's bet against the dollar paid off. Iscar, based in Tefen, Israel, makes metal-cutting tools. Its U.S. headquarters is in Arlington, Texas.

"My partner Charlie Munger and I have been impressed by IMC's simple and profitable business model. With this acquisition, we have the benefit of investing in a stable business with very significant growth prospects."

The deal appears to be the third largest in Berkshire's history, behind this year's $5.1 billion acquisition of utility PacifiCorp and the $16 billion stock purchase of reinsurance giant General Re in 1998. Investors had been speculating that Buffett might announce an acquisition at Berkshire Hathaway's annual meeting Saturday. A company spokeswoman said no one was available to discuss the acquisition because officials are preparing for the meeting. Berkshire Hathaway company had $44.7 billion in cash and equivalents at the end of last year, and Buffett said in his letter to shareholders in March that he would need to make "major acquisitions" to accelerate growth in earnings. He has complained about a dearth of investment opportunities as he has shifted to buying companies rather than equity stakes.

"Good for Warren. He's finally found something to buy."

The Wertheimer family, which founded the company more than 50 years ago, will own the remaining 20% of Iscar. Eitan Wertheimer, the chairman, and Jacob Harpaz, the president and chief executive, will continue to run the company from Israel. In March, Berkshire Hathaway's MidAmerican Energy Holdings Co. bought Portland, Ore.-based PacifiCorp from Scottish Power PLC for $5.1 billion in cash. Last month, Berkshire agreed to buy Atlanta-based Russell Corp., which makes athletic apparel and Spalding basketballs, for about $597 million in cash. Berkshire Hathaway said net income in the first quarter climbed to $2.31 billion, or $1,501 share, from $1.36 billion, or $886 a share, a year earlier. Foreign currency investments added $151 million in gains. Buffett, who relies on insurance for about half his company's profit, benefited from higher short-term interest rates and moderate weather. Profit before investment gains was $1.79 billion, or $1,160 a share, beating the $1,061 per-share estimate of Gary Ransom at Fox-Pitt, Kelton Inc. The report came out after the close of trading.