The Israel Aircraft Industries (IAI) recently informed the cabinet that it is interested in buying the Israel Military Industries (IMI) in its entirety. IAI's CEO, Izthak Nissan, confirmed the report: "We are willing to remove the burden of the endless handling of IMI from the government." However, the offer also requires an agreement on firing IMI workers and severance payments.

The cabinet has already decided on a framework for privatizing government companies, but IAI is proposing at this stage a merger with IMI - a step that contradicts the state's policy.

In the defense sector feelings are that IAI will be willing to privatize the combined company on the stock market immediately after the merger is completed. The cabinet's decision on privatizing the firms was made over a year ago.

Nissan denies that IAI agreed to such a step, and said that in any case IAI's management has no authority to privatize the company. He said that the workers were the main stakeholders in the matter, and that any negotiations over privatizing IAI would have to include employees.

IAI released its third quarter results yesterday, and showed a 14 percent rise in sales for the quarter to $777 million. Net profits were up 56 percent to $36 million.