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Buffett to buy stake in Marmon

US billionaire investor Warren Buffett announced he was buying a 60 percent stake in Marmon Holdings Inc, an industrial group owned by one of the richest families in the US, for US$4.5 billion.

Buffett's investment vehicle, Berkshire Hathaway Inc, will acquire the remaining 40 percent of Marmon over five to six years at a price to be based on the group's future performance, the two sides said in a statement on Tuesday.

Marmon, which has been owned by Chicago's Pritzker family since 1953, is a manufacturing and services group with more than 125 units whose products range from railroad tank cars to electrical wires and cables.

Marmon will make a "substantial distribution of cash and certain assets" to selling shareholders before the deal closes in the first quarter of next year, the statement said.

The group, which boasts an overall revenue of US$7 billion, employs about 21,000 people and operates more than 250 manufacturing, distribution and service facilities in Britain, Europe, North America and China.

Marmon's operating income more than tripled between 2002 and this year while operating margins increased from 4.9 percent to 12.4 percent during that same period.

The Wall Street Journal said Buffett's acquisition reflects "his fondness for unflashy businesses that deliver steady and strong cash flow and feature high barriers to entry."

Berkshire Hathaway already owns other industrial businesses, including Johns Manville, a building products company, and Iscar Metalworking, an Israeli tool maker, in which Berkshire took an 80 percent stake last year for US$4 billion, the paper said.

The deal with Buffett is part of the family's decision in 2001 to unwind its empire.

"This transaction is the culmination of a process that began six years ago," said Marmon chairman Tom Pritzker, whose father Jay acquired Marmon with his brother in 1953.

"Berkshire Hathaway's decision recognizes the fine work of our management team over this period and the transaction is being done in the context of the previously reported restructuring of our family business interests," he said in a statement.

In an interview with the Journal, Pritzker said Buffett's reputation for being a hands-off owner made him the ideal partner for the company.

"His philosophy is very consistent with our goals," Pritzker was quoted as saying.

In the statement, Buffett said the deal was quickly completed after he met with Marmon's current chief executive, Frank Ptak, and his predecessor, John Nichols.

"Our transaction was done just the way Jay would have liked it to be done -- no consultants or studies," Buffett said. "After meeting with Messrs. Ptak and Nichols, they were just what I expected from Marmon's impressive record of growth and profitability over the years, and the decision to purchase and work out the details of this transaction was done without delay."
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