Comptroller probing privatization of Magen: Just why was it sold so cheaply?
Sammy Katsav paid NIS 2.5 million for the arms-maker, a fraction of the fine another company paid to withdraw from a deal
The state comptroller is investigating the decisions involved in privatizing the Israel Military Industry's Magen defense plant, which was sold to Sammy Katsav for the extraordinarily low price of NIS 2.5 million.
Among other things, the Magen plant makes the supremely popular Uzi submachine gun.
Shortly after the sale, TheMarker revealed that the sale price was especially low. Its report prompted questions within the defense industry, because the expected profits of the factory were $3 million a year.
Around a year before Magen was sold to Katsav, the Government Companies Authority signed an agreement to sell the plant for $20-25 million to a consortium led by the General Defense corporation. But the deal fell through: General Defense backed out and paid a $1 million fine to IMI. The fine alone is more than Katsav paid for the firm.
Sources close to the sale at the time said that difference between the two offers was extraordinary. Now, it seems that the comptroller wants to know whence the discrepancy.
TheMarker revealed that reports stated the company's expected net profits would reach $3 million for each of the three years after the sale, so the plant was sold for less than the profit the owner raked in in the first year of operations.
According to TheMarker's findings, Katsav committed himself to paying 30% of the company's pension commitments, amounting to $3 million, while the Finance Ministry and IMI were to pay the rest.
The treasury also undertook to cover NIS 350 million debt to pensioners.
At the time, the treasury said that the deal was made after a tender, and that questions on the matter should be asked of IMI.
The treasury also said that it was not a whole company that was sold, but one division that was losing money.
The Magen plant produces Uzi, Galil and Glilon rifles, and pistols. Katsav also received an option to purchase another IMI plant in Kiryat Shmona.