Still Under Probe in Israel, Dronemaker Struggles to Make Deal Deadline

Despite being under police investigation in Israel, Israeli drone maker Aeronautics Ltd. is still banking on completing a previously announced deal. In a Wednesday filing to the Tel Aviv Stock Exchange, the company said it expects to make the May 31 deadline for the acquisition of U.S.-based company Chassis Plans Inc., first announced in September 2017.

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In September, Aeronautics agreed to pay $6 million for the San Diego, California-based military and industrial computer system manufacturer, subject to regulatory approval in the U.S. At the time Aeronautics said it expects to complete the deal by the end of November, later pushing the deal's deadline to the end of May 2018.

What hindered Aeronautics’ plans was a November 2017 announcement by Israeli police that the dronemaker is being investigated in relation to a deal it signed with an undisclosed, non-Israeli client.

Founded in 1997, Aeronautics specializes in the development of unmanned aerial Vehicles (UAV) for military use and has over 45 defense, military, and homeland security customers worldwide.

In August 2017, the Israeli Ministry of Defense halted Aeronautics’ license to export its Orbiter 1K unmanned aerial vehicle to an “unnamed but prominent customer,” blocking a deal which the company valued at $20 million. Shortly after the investigation was made public, an Israeli court issued a sweeping gag order on it. Media reports preceding the gag order connected the inquiry with an incident in which Aeronautics had allegedly carried out a live demonstration of one of its suicide drones on an Armenian army post at the request of its client, the Azerbaijani army.

Following the signing of the Chassis Plans acquisition deal, Aeronautics applied for the approval of the Committee on Foreign Investment in the United States (CFIUS). Unable to proceed with the regulatory process due to the ongoing investigation, on Wednesday Aeronautics said the CFIUS allowed it to withdraw its request for approval, effectively signing off on the deal.

Aeronautics said that the CFIUS holds the right to force Aeronautics to sell Chassis Plans at a later date, if it decides to retroactively reject the deal.

Aeronautics said it now expects to finalize the deal by the end of the month.