Composite magnets were prepared by hot pressing followed by hot deformation of blends composed of Nd14Fe79.5Ga0.5B6 or (Nd0.75Dy0.25)(14)Fe79.5Ga0.5B6 ribbon powders as a high-coercivity component and Fe powder as a high-magnetization component. The addition of 15 wt % alpha-Fe to (Nd0.75Dy0.25)(14)Fe79.5Ga0.5B6 increases the remanent magnetization of the hot-deformed magnets from 10.6 to 12.04 kG, while the maximum energy product is also increased from 27.3 to 29.5 MG Oe for hot-deformed magnets with 10 wt % alpha-Fe addition. Microstructure investigations of the composite magnets revealed the size of the Fe particles in the micrometer range, exceeding by far the size for effective exchange interactions. Despite a less refined microstructure, the particular layered configuration of the composite magnets gives rise to a positive magnetostatic coupling of the grains and therefore a unitary magnetic behavior with enhanced magnetic properties. The cooperative demagnetization process, together with the magnetic coupling of the grains, was pointed out through a smooth demagnetization curve and a sharp single peak of the irreversible susceptibility. (C) 2006 American Institute of Physics.