Former Union Boss, Industry Leader Among Likely Bidders for Israel Military Industries

Privatization of state-owned arms maker kicks off this week.

A David's Sling/Magic Wand missile is launched from a truck-mounted launcher, part of the missile defense system developed in partnership with Israel Military Industries.
Israel Military Industries

In an unusual alliance of labor and capital, the former heads of the Histadrut labor federation and the Israel Manufacturers Association are teaming up to make a bid to buy state-owned Israel Military Industries.

Former Histadrut chairman Ofer Eini and former Manufacturers Association leader Shraga Brosh have an unidentified third partner as well, which appears to be an investment fund, say sources close to the privatization process underway for the legendary state-owned company that developed and once made the Uzi submachine gun.

Representatives from the Government Companies Authority and IMI, including its chairman Udi Adam and CEO Avi Felder, begin meeting with potential investors Tuesday.

Among them are Elbit systems, the Israeli defense electronics maker, British buyout fund Apax Partners and Israeli private equity fund Fortissimo. Meir Shamir, whose Mivtach Shamir holding is due to complete the sale of its stake in the dairy giant Tnuva shortly, is another prospective buyer, as is Sami Katsav, who bought IMI’s Uzi business in 2005 and now produces it through closely held Israel Weapon Industries.

IMI is one of a score of companies, some as big as Israel Electric Corporation and Israel Aerospace Industries, that the state plans to sell, in whole or in part, through either direct sales to private investors or by floating their shares on the Tel Aviv Stock Exchange.

The government is hoping to privatize IMI at a valuation of between 1.5 billion and 2 billion shekels ($381 million to $507 million). The state is forgiving some 1 billion shekels in debt the company is carrying and is buying out contracts for employees being laid off at an average cost of 1.2 million shekels.

The company, which makes everything from armored vehicles and rocket launchers to body armor and counterterrorism training, is being sold as a single business with its most security-sensitive units spun off into a new government-owned company called Tomer. In addition, IMI is committed to giving up its prime real estate in the greater Tel Aviv area to move to the Negev by 2020.

The sale process, which is being jointly administered by the GCA and the Defense Ministry, will be open to Israeli and foreign investors. Potential buyers who pass the first stage of vetting will be required to make a 6 million-shekel bank guarantee to be given access to the so-called information room that contains financial and other data on IMI. Those who reach the bidding stage will have to put up a 35 million-shekel guarantee.

Under the terms of the privatization plan, which is being advised by the U.S. investment bank Stifel, foreign individuals or foreign companies that operate through a locally incorporated business, in which they will be permitted to hold up to 90% of the equity.