updated 5/8/2006 3:24:19 PM ET 2006-05-08T19:24:19

Israeli industrialist Stef Wertheimer couldn't even afford a lathe when he started his cutting tools company in 1952 in a backyard shed.

But his Iscar Metalworking Co. grew into one of the country's largest manufacturers and has become the talk of Israel now that legendary U.S. investor Warren Buffett added it to his fat portfolio. Buffett paid $4 billion for an 80 percent stake in the privately held company, sight unseen. Wertheimer's family will continue to own the remaining 20 percent.

Israeli media on Sunday devoted far more attention to the colossal sale than to the evacuation of Jewish squatters in the volatile West Bank city of Hebron.

The investment was Buffett's biggest outside the U.S., and Israeli Prime Minister Ehud Olmert predicted it would focus international investors' attention on a country known primarily for its wars.

"He is not Jewish, he is not a Zionist," Olmert said of Buffett. "He is only saying that he supports the Israeli economy and sees in it what we, even in our dreams, hesitate to say."

The Tel Aviv Stock Exchange soared on the news, with its index of blue chip stocks rising 2.7 percent to a record high on Sunday, a workday in Israel. The market pulled back slightly, about .27 percent, on Monday.

For Stef Wertheimer, who fled Nazi Germany at age 10, industry was part of his vision of building a Jewish state.

Buffett's investment "put the country on the map as an investment target, bringing with him new markets and clients, who will ensure the continued growth of the entire region," the 79-year-old Wertheimer wrote in a column in the Yediot Ahronot newspaper on Sunday.

Wertheimer was a self-taught man who says his formal education ended at 14 after he was expelled for slugging a teacher who harassed a female classmate.

From then on, he started developing the skills he later used in industry, working as an apprentice in an optical shop and a camera repair shop, repairing bomb sights for the Royal Air Force during World War II, and later, in Israel's pre-state underground, making precision tools to manufacture guns and bombs.

In 1952, in the early days of the Jewish state, he found himself without a job, so he went into business for himself, founding Iscar with a grinding machine that wasn't top of the line even then.

Located in the hills of Israel's northern Galilee region, Iscar is far from the world's manufacturing and commercial hubs.

It's also far from the local power centers in Tel Aviv and Jerusalem — something that suits Wertheimer, who disdains talk of stock prices and prefers action to words. He bowed out of politics after just four years in parliament in the 1970s, despairing of getting government to promote industry.

His frustration launched him on a crusade to do what government wouldn't. He set up four industrial parks in Israel's underdeveloped Galilee and southern Negev regions, nurturing more than 150 export-oriented businesses.

Today, Iscar Manufacturing's main products are precision carbide metalworking tools. In announcing the deal on Friday, Buffett called it a "top performer in its industry." It operates in Europe, Asia, Latin America and North America, where Buffett feels it has opportunities to grow.

"I think you'll look back on this in five or 10 years as a significant event in Berkshire history," Buffett said over the weekend at the annual meeting of his holding company, Berkshire Hathaway Inc., in Omaha, Neb. Buffett has said Iscar's current management and employees will be untouched.

In recent years, Stef Wertheimer's son, Eitan, took over the company's operations and clinched the deal with Buffett. The elder Wertheimer has tried to take the lessons learned from developing a global business in a strife-torn industrial backwater to create a springboard for Mideast peace.

Industry, he believes, would create jobs and foster stability, diminishing the attraction of terrorism and providing improved trade opportunities for the West. But the realities haven't always played into that scenario.

Wertheimer tried to set up twin Palestinian and Israeli business parks in late 2000, with a cafe in the middle. But shortly before the planned groundbreaking, the Palestinian uprising against Israel broke out, and the plans were shelved.

He later switched his sights to Turkey, where he is involved in a high-tech industrial park outside Istanbul. But an industrial park planned for Aqaba, a southern Jordanian port, never took off because authorities feared backlash from the predominantly Palestinian population.

Wertheimer also failed to get the U.S. government to pour billions into this program, which he likened to the post-World War II Marshall Plan that helped to rebuild Europe. But he remains undeterred.

"I plan to invest all of my energies in establishing additional industrial parks in Israel, Turkey and other neighboring countries, so we can end the conflict in this region," he wrote in the newspaper column.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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