updated 5/5/2006 6:39:11 PM ET 2006-05-05T22:39:11

Rather than wait for Saturday’s annual meeting, Warren Buffett’s Berkshire Hathaway Inc. announced a multibillion-dollar acquisition Friday.

Berkshire said it will pay $5 billion for an 80 percent stake in privately held Iscar Metalworking Cos., which makes metal cutting tools. The company’s current owners, the Wertheimer family, will retain 20 percent ownership.

The deal appears to be the third largest in Berkshire’s history, behind the $5.1 billion acquisition of utility PacifiCorp announced last year and the $16 billion stock purchase of reinsurance giant General Re in 1998.

Investors had been speculating that Buffett might announce an acquisition at Saturday’s meeting because Berkshire has been flush with more than $40 billion in cash, and Buffett has said he was looking for the right opportunity.

Iscar’s current management team will remain in place, as is customary when Berkshire buys companies. Iscar has facilities worldwide, with the largest located in Tefen, Israel.

“We are delighted to partner with the Wertheimer family and IMC’s current management, led by Eitan Wertheimer and Jacob Harpaz,” Buffett said in a statement. “As a truly international business, IMC is a top performer in its industry, with exposure to European, Asian and Latin American markets, as well as significant opportunities for growth as it continues to penetrate the North American market.”

Berkshire spokeswoman Debbie Bosanek said no one was available to discuss the acquisition because company officials are preparing for the annual meeting, which is expected to draw a record crowd of about 23,000 people.

The transaction remains subject to customary closing conditions, including regulatory approvals.

The Iscar investment will increase Berkshire’s international exposure. In recent years, Berkshire has taken a short position on the dollar, essentially betting on a decline in the U.S. currency.

Berkshire owns a diverse mix of companies including furniture, insurance, jewelry and candy companies, restaurants, natural gas and corporate jet firms, and it has major investments in such companies as Coca-Cola Co., Anheuser-Busch Cos. and Wells Fargo & Co.

Iscar’s chairman, Eitan Wertheimer, and president and chief executive, Jacob Harpaz, said they were glad their company will be joining the Berkshire family.

“This acquisition ties the knot between Berkshire Hathaway, one of America’s outstanding businesses, and IMC, an extraordinary industrial company with a truly global reach, and a presence in the world’s most dynamic regions and economies,” Jacob Harpaz said in a statement. “We believe that our partnership with Berkshire will further strengthen our position in the North American market and worldwide, and allow us to continue the phenomenal growth that we have experienced over the past 50 years.”

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