It has been almost four years since the Ministerial Privatization Committee decided to float Israel Aerospace Industries (IAI) shares on the Tel Aviv Stock Exchange, but for all investors' desire to buy high-quality defense stocks, the move, which was supposed to result in an injection of billions… Shekels to the state treasury were not achieved. This is despite the fact that the company's bonds are already traded on a stock exchange, which would facilitate the process.
In November 2020, the Ministerial Privatization Committee approved a plan under which the state could sell up to 49% of IAI shares through a public offering. Initially, about a quarter of the shares in ISAI were to be sold for an estimated amount of NIS 3 billion. Guarantors were selected, but for a number of reasons – the priorities of the relevant government ministries, the need to reach understandings with the powerful corporate consortium, and in the last two years, the weakness of the primary market in Tel Aviv, which had almost completely dried up – prevented progress from progressing.
On the government side, the IAI offering was supposed to be led by David Amsalem, the minister responsible for the State Corporations Authority, and Defense Minister Yoav Gallant. With the war going on in his hands, Gallant does not have enough time to deal with the stock offering, which requires complex coordination between ministries that do not agree with this and other matters. Therefore, it is not clear when the show will return to the agenda.
IAI develops, sells and maintains military and civilian aircraft, missiles and military electronic products. The volume of its bonds amounts to 154 million shekels, traded on the Tel Aviv Stock Exchange, with a return to maturity of 4.3%.
Even without the float, the state benefits from the ownership of Israel Aerospace Industries, whose business is booming due to the war in Israel and the arms race in Europe. Last week, the company's board of directors, chaired by Amir Peretz, approved CEO Boaz Levy's proposal to pay a dividend to the government of NIS 580 million, after record results in 2023: a net profit of $328 million on revenue of $5.3 billion.
Meanwhile, Globes has learned that the acting director of the State Enterprise Corporation, Yankee Quint, wrote to Gallant this week demanding that the IAI flotation be renewed, at Amsalem's request.
Quint stated that indicators indicate that offering 35% of the company could generate more than 10 billion shekels.
“Due to the war and the security situation, defense budgets and needs have increased, and this is expected to continue in the coming years,” Quint wrote. “As a direct result, Israeli defense companies need to increase the rate of production and supply to the Defense Forces, and therefore significant investments are needed in production lines, infrastructure, and research and development, in order to maintain and develop our technological superiority. Weapons of the State of Israel of the Future.”
Quint's approach comes after it was reported last week that the labor dispute over payrolls at IAI had ended, and that the two sides were continuing negotiations in hopes of reaching a permanent solution by the end of the year.
Published by Globes, Israel Business News – en.globes.co.il – on June 19, 2024.
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