Nalco plans aggressive push into developing world
Nalco Holding Co., the latest firm added to the stock portfolio of Warren Buffett's Berkshire Hathaway Inc., plans to expand its water treatment business in emerging markets including the Middle East and China.
Naperville-based Nalco was the only firm added to Berkshire's U.S. equity portfolio in the fourth quarter, according to a regulatory filing yesterday. The company makes chemicals that prevent corrosion and the buildup of harmful deposits in boilers and cooling towers, and serves the paper, steel and power industries.
"We're doing some exciting things to go after growth opportunities, and it's a great feeling for me and my team to have one of the savviest investors in the world give us a vote of confidence," said Nalco Chief Executive Officer J. Erik Frywald in a telephone interview today. "There's a little more energy in our step today."
Nalco shares rose 56 cents, or 5.1 percent, to $11.62 at 11:17 a.m. in New York Stock Exchange composite trading. The stock has declined 42 percent in the past 12 months.
Berkshire, based in Omaha, Nebraska, has been investing in manufacturing firms with global operations in the past three years. Buffett, 78, made his first non-U.S. acquisition in 2006, paying $4 billion for 80 percent of Israel-based Iscar Metalworking Cos., a closely held maker of industrial tools with operations in countries including China.
Berkshire agreed in December 2007 to buy 60 percent of Marmon Holdings Inc. for $4.5 billion from the Pritzker family. Companies owned by Chicago-based Marmon have operations in North America, the U.K., Europe and Asia, making products ranging from railroad tank cars to wire used in appliances and telecommunications.
Nalco has about 11,500 employees in 130 countries. Buffett didn't respond to a request for comment through assistant Carrie Kizer.
Mutual funds and individual investors sometimes mimic Berkshire's stock picks in an effort to duplicate Buffett's investing success, though he's said that not all moves in the equity portfolio are his. Berkshire, where Buffett is chief executive officer, owned about 6.4 percent of the firm as of Dec. 31, according to Bloomberg data.
Frywald said he learned of the investment from an e-mail while sitting in his office at the firm's headquarters late yesterday, and the chief financial officer, Brad Bell, came in moments later to alert him. Berkshire's stake has a value of about $96.7 million, based on yesterday's closing share price.
"We're thrilled by it, and obviously we want to continue to earn his confidence," Frywald said.
Frywald joined the firm last year from DuPont Co. His salary was set at $850,000, according to a regulatory filing last February.
The firm last year matched its largest sales increase in a decade, expanding 7.8 percent to $4.21 billion. Growth in its target countries, which include Brazil, India and Russia, exceeded 20 percent.