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Netanyahu Greenlights Floating of Israel’s Largest Aerospace and Defense Company

Netanyahu Greenlights Floating of Israel’s Largest Aerospace and Defense Company

Israel is looking to list state-owned defense contractor IAI in mid-2019. The plan is to sell 25% of the company’s shares according to a $4 billion post-IPO valuation

Golan Hazani | 09:09  10.12.2018
Israeli Prime Minister Benjamin Netanyahu is getting the ball rolling on listing Israel-based government-owned defense contractor Israel Aerospace Industries Ltd. (IAI), with the aim of going public in mid-2019.

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Netanyahu—who has also been serving as Israel's minister of defense since the resignation of Avigdor Lieberman last month—has directed the director general of the defense ministry and the director of the Government Companies Authority to quickly advance the matter,

According to two people familiar with the matter who spoke to Calcalist on condition of anonymity. The Israeli leader also intends to bring the matter up for government discussion in the upcoming month, these two people said.

Tel Aviv Stock Exchange. Photo: Bloomberg Tel Aviv Stock Exchange. Photo: Bloomberg Tel Aviv Stock Exchange. Photo: Bloomberg

IAI, Israel’s largest aerospace and defense company, develops defense systems including anti-missile, aerial technologies, and intelligence and cybersecurity systems. the company's privatization has been approved by the government in 2014, but the process has been put on the back burner as the privatization of arms manufacturer Israeli Military Industries (IMI) Systems Ltd. and the Israeli postal service was ongoing.

In the past two weeks, representatives of IAI have met with defense ministry executives to discuss the restrictions that will be placed on the company's public reports following its listing, to prevent the exposure of information that could threaten state security. Only around 20% of IAI's operations are located in Israel, and only a small part of those are considered sensitive.

IAI currently has bonds trading on the Tel Aviv Stock Exchange. According to the plan currently advanced, Israel will list 25% of the company's securities according to a post-IPO valuation of $4 billion, a somewhat ambitious valuation considering IAI reported a net loss of $19 million for the third quarter of 2018. Investors may potentially be swayed by the company backlog of orders, which totals $13 billion.

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The IPO process will contain fail-safes to prevent investors from gaining control of the company. No shareholder could acquire a stake larger than 4.99%, and only the state will have the right to appoint board members.

to complete the IPO successfully, IAI will need to reach an agreement with its employees, who are demanding a cut of the profits the IPO is expected to net both IAI and the state. The company is also currently undergoing a restructuring process that has seen 800 employees retire, with hundreds more expected to retire in the near future.
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