Warren Watch: Billionaire Koch brothers make deal-making pitch to rival Buffett's

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Posted: Sunday, July 14, 2013 12:00 am

One of Warren Buffett's pitches goes like this:

If you've built up a great business and want to find a permanent, favorable home for it while you continue to be in charge, give Berkshire Hathaway Inc. a call.

“We can promise complete confidentiality and a very fast answer — customarily within five minutes — as to whether we're interested,” Buffett promises each year in his annual letter to shareholders.

Now another Midwestern conglomerate, led by a pair of billionaire brothers from Wichita, Kan., is making the same pitch: Koch Industries Inc., privately owned by Charles and David Koch and the subject of a recent Wall Street Journal article.

“Despite the scale of their business holdings,” Journal staffer James Hagerty wrote, “... the Koch brothers have long been overshadowed as deal-makers by their folksy neighbor in Omaha: Warren Buffett.”

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The Kochs believe they can make big deals, act quickly and be hospitable to businesses they acquire, too.

Charles Koch, in a rare interview, said of Buffett, “He's done a great job of having a brand that if you want to sell your business and continue to run it, come here. ... We've been actively talking to Wall Street about making sure there are at least two phone calls placed on those situations going forward, not just one.”

The story compared 2012 annual revenue, $162 billion for Berkshire and $115 billion for Koch, and three “notable deals” by the two companies, totaling $54.3 billion for Berkshire and $19.1 billion for Koch.

Another contrast, the Journal said: Democrat Buffett and the conservative brothers are near-polar opposites on politics.

Scaling up projects

That extra money Buffett donated to his children's foundations last week will come in handy, son Howard Buffett said.

“We will be able to scale up some of our most important activities,” he wrote in an email. “We are trying a new approach to try to achieve peace in eastern democratic republic of Congo, and these funds provide the opportunity to do additional work. With our strategy there, we need to reach scale faster, so this is a significant boost.

“It also allows us to leverage larger investments in Central America. ... It is an amazing opportunity to try to bring new ideas and change!”

Last year, Buffett announced he would double the donations starting in 2013 because he was pleased with the work that Howard and his siblings, Susan and Peter, are doing through each of their foundations. Each received $140 million worth of Berkshire stock, up from $60 million last year.

Goal for Mideast

Stef Wertheimer's plan for the $6 billion that Berkshire paid for Israeli toolmaker Iscar is, in a way, simple: building industrial parks in the Middle East to boost the economy. His second purpose is difficult: peaceful interaction between Arabs and Jews.

Wertheimer, whose letter to Buffett in 2006 led to Berkshire's first non-U.S. acquisition, told New York Jewish newspaper the Forward that his $22 million industrial park in Nazareth, Israel, aims to promote Jewish-Arab cooperation as much as jobs and national development.

“Wertheimer is convinced that if good employment opportunities are in place, support among Arabs for radicalism will wane, with people too tired after a hard day's work to even think about aggression,” the Forward reported. “Moreover, if these opportunities require interaction with Jews, he believes, positive relationships will be forged and hatred banished.”

The Nazareth project is part of the Arab mainstream, the newspaper said, managed by the chairman of an Arab-Israeli group formed in response to confrontations in 1976 that left six Arabs dead.

From his office in Tel Aviv with a “stupendous view of the Mediterranean,” Wertheimer, 86, pledged to build more parks in Arab areas of Israel, where they have been absent.

The task won't be easy. So far about 40 percent of the new park is rented, including a business owned by Amal Ayoub, thought to be the first Arab woman to head a startup in Israel.

Ayoub said Israel's Arab sector “lacks homegrown businesses and the skills to generate them” and needs government support to bring industry to the park.

Wertheimer called his venture a capitalistic kibbutz system to nurture industry. His six industrial parks in Israel and one in Turkey break even, he said. “I deal with building the country. If I happen to make money with it, then fine.”

The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.

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