(photo credit: Associated Press)
Prime Minister Ehud Olmert reportedly predicted in his Saturday night conversation with Eitan Wertheimer, chairman of the board of Iscar - the metal-cutting tools firm in which American investor Warren Buffett acquired an 80% stake over the weekend - that this deal "will be spoken of in the same light as the Balfour Declaration." Even if Olmert laid it on a bit thick, his general sentiment isn't misplaced.
The fact that the world's second-richest man (after Bill Gates) has chosen Israel for his Berkshire-Hathaway investment firm's third largest acquisition ever cannot be judged as anything but a monumental vote of confidence in Israel's economy.
Iscar is a sabra - born and bred in Israel. It's entirely homegrown, raised in soil that tests the stamina of those who strive to cultivate anything in it. Nevertheless, this sophisticated manufacturing firm rose from the humblest of beginnings, from Steff Wertheimer's one-man operation in a Nahariya wooden shed, to an international-scale player which attracted interest and cash outlay from one of the world's savviest and most successful investors.
This is an even greater feat than that of Israel's innovative hi-tech wonders, conjured from naught to be purchased in a matter of a few years by global leaders in the field. These firms were often small fry swallowed up by larger creatures in their pond. Iscar is itself a huge fish and investment in it isn't geared to erase a competitor or amalgamate with it. Berkshire-Hathaway boasts a broad scope of investments in companies as diverse as Coca Cola and Wells Fargo. It isn't Iscar's rival and intends to keep it going as is.
A major condition of the sale reportedly is that Iscar remains in the Galilee, and that its personnel won't be trimmed or otherwise adversely affected by the change of ownership. Essentially, there should be no revolution in Iscar's Israeli operations, aside from the incalculable shot in Israel's economic arm.
The psychological boost is all the more potent considering that someone like Buffett chose Israel, literally sight-unseen (his first visit here is scheduled in September), as the venue for so enormous an overseas venture, especially at a time in which the dangers confronting us seemed to have escalated. To bet on an economy next-door to a Hamas entity and potentially threatened by Iranian nukes can only constitute the greatest of faith in Israel's ability to weather all adversity.
Average Israelis engrossed in their daily struggles to make ends meet can take heart from this mega-deal even if it doesn't directly impact on their own household bookkeeping. This is precisely what the Tel Aviv stock exchange did when its indexes went soaring following news of the transaction, despite the fact that the Wertheimers studiously avoided TASE and at times were almost seen to thumb their noses at it. The overall implications were readily understood at the Tel Aviv bourse even if Iscar was never floated on it.
When Israel was founded and struggled to stay alive 58 years ago, it would have taken a particularly hallucinatory imagination to forecast a day in which Israeli industry would thus interest the world's greatest movers and shakers.
Nevertheless, this should not be the culmination of our aspirations. It is not too brazen to hope that truly successful Israeli firms assume the role of major players in the globalized marketplace yet stay fully and unequivocally Israeli.
Other small economies have done it. Finland's Nokia, for instance, remains Finnish. The hallmark of Israeli success need not be a buyout by foreign investors or the transplantation of Israeli manufacturing abroad (the Wertheimers have done that too - they manufacture in China, Poland and Turkey). Israel must stay attractive enough to keep its own investors here, where they can succeed yet stay Israeli.
Investors the world over will not miss this event and will be able to reason that if Buffett considers Israel a land of promise, they might do the same. Our challenge will be to keep that promise viable.
With all his goodwill, Buffett is not Wertheimer and his commitment to the Galilee hinges on the bottom line. Still, while the guiding considerations in future for Iscar may become less Israeli-oriented, the acquisition, assuming the business continues to flourish, will continue to benefit this country for many years to come.
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