Analysts: Marmon Group Sees No Shakeup Under Buffet

Jason Sandefur

Calling it good news for the U.S. industrial segment, analysts praised Warren Buffet’s decision to buy a $60% stake in the Chicago-based Marmon Group for $4.5 billion (see FIN 12/26/07 News Flash).
“(The deal) is most certainly a vote of confidence for ‘nuts and bolts’ businesses,” Steven Kaplan, a professor of finance at the University of Chicago Graduate School of Business, told the Associated Press.
Marmon fastener holdings include manufacturers Nylok Corp. of Macomb, MI; Pan American Screw and Deerwood Fasteners International, both of Conover, NC; Robertson Inc. and Specialty Bolt & Stud Inc. in Ontario, Canada; Atlas Bolt & Screw Co. of Ashland, OH; and fastener distributor SureDrive Inc. of San Francisco.
Buffet is no “slash and burn” mogul, preferring instead to invest in solid companies that demonstrate strong growth potential. Under his ownership Nylok Corp. and the other 120-some companies in the Marmon Group are expected to continue under their current leadership in line with “Buffet’s traditional hands-off approach to acquired companies.”
“It is very typical of his investment strategy,” Kaplan explained. “He buys businesses that he can understand, that are profitable and generating cash, and that is true of Marmon. He also looks for good management teams that he doesn’t have to tinker with & and lets them do their jobs.”
Marmon chairman Tom Pritzker echoed that assessment, telling the Chicago Tribune that his family and Buffet have “similar philosophies of running companies,” which includes respect for management and motivating managers to run companies well.
“I do think Marmon has a great future,” Pritzker asserted.
Some analysts highlighted the business savvy of the acquisition, saying that investing in U.S. industrial company has increased benefits as more companies flock overseas for cheaper operating costs.
“Through more industrial development going overseas, America has left itself rather vulnerable,” mused hedge fund manager Thomas Russo. “And when you get the chance to grab onto a company that offers indispensable technology and can serve a customer’s needs quickly, you may actually have quite a competitive advantage.” Web: marmon.com �2008 FastenerNews.com