U.S. firms set to be barred from Israel Aerospace Industries’ $5 billion IPO

The Israel Aerospace Industries (IAI) will not be offering its shares to U.S. buyers when it goes public next year due to a veto by local defense sector officials who are concerned about the possibility of having to litigate in U.S. courts in the future.

The country’s largest aerospace and defense company is set to go public on the Tel Aviv Stock Exchange (TASE) in the first half of 2021 after the ministerial committee on privatization approved the proposed IPO on Thursday.

While there is no plan to sell shares to U.S. clients, the IAI is looking into the option of holding a roadshow in London and Asia. As part of the IPO, IAI employees will receive 6% of the shares.

The majority of the money raised from going public will be channeled back into the company, with approximately NIS 1 billion ($300 million) to be transferred to the country's coffers. The Ministry of Defense had unsuccessfully lobbied for all the proceeds to be sent to the IAI where it would have greater control on how they were spent.

Discussions regarding an IAI IPO have been ongoing for over 25 years. It was often the employees who stood in the way of privatization, but this time they seem set to support the move, although all the details have yet to have been agreed upon.

There are several other issues that still need to be addressed, including receiving a court approval to maintain confidential deals secret despite Israel Securities Authority regulations demanding transparency from listed firms. In addition, a decision needs to be made regarding which types of buyers will only be allowed to purchase a limited stake and what the limit will be set at.

The IAI announced its highest net profit ever recorded in the first nine months of a fiscal year last Sunday, seeing a 37% growth to about $112 million and surpassing the entire annual profit for 2019. The company's sales in the three quarters of 2020 exceeded $3 billion – the highest nine-month period sales in its history. The growth in the Military Groups offset the effects of Covid-19 on the Aviation Group's operations.