Netanyahu orders partial privatization of Israel Aerospace Industries

The prime minister has instructed that preparations be made to offer 25 percent of IAI shares to the public by next year.

By Batya Jerenberg, World Israel News

In his additional role as defense minister, Prime Minister Benjamin Netanyahu has ordered the partial privatization of Israel Aerospace Industries (IAI), which accounts for up to half of Israel’s defense exports and is valued at approximately $4 billion.

Netanyahu has asked his director-general and the director of the Government Companies Authority to begin the process whereby a quarter of the company’s stock will be sold to the public by mid-2019, Calcalist reported.

Netanyahu would like to expedite the process, which involves several time-consuming steps. This is necessary because of IAI’s intimate knowledge of the country’s defense needs, which the government cannot allow to be exposed in the detailed activity reports it would have to file by law on a quarterly and annual basis after the stocks are sold.

Mechanisms will also be put into place to ensure that foreign parties cannot become too powerful within the company. Nor will they be permitted to buy more than 4.99 percent of the shares. Directors to the board will be appointed only by the government.

Approval to partially privatize the state-owned giant was already given in 2014, but it started to gain ground only some 18 months ago, with Reuters reporting that IAI’s Chief Financial Officer Eyal Younian was seeking permission to sell a 20% stake in the company on the Tel Aviv Stock Exchange. The reasoning behind such a move was to help IAI become more commercially competitive, Younian said, by raising money to finance acquisitions abroad in a better way than borrowing funds either directly from the banks or by issuing bonds, which would entail paying interest.

According to Calcalist, the valuation of the company is “ambitious,” since IAI is currently operating at a loss, finishing the third quarter of the year $19 million in the red. However, its backlog of orders is valued at $13 billion, the highest in its history, which bodes well for the company’s future.

IAI is a world leader in the defense and commercial markets, supplying cutting-edge technological systems on land, sea and air, as well as on the newest domain – cyber.  Although historically it is best known for its modifications and upgrades for military aircraft, IAI has also led the development of Israel’s Arrow missile defense systems and produces radar systems as well as observation, research and communication satellites.