Treasury Wants to Sell Stakes in Israel Aerospace Industries and Rafael

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With Israel's budget deficit widening, the Finance Ministry has proposed initial public offerings of 20 percent stakes in two of its major defense companies: Israel Aerospace Industries and Rafael Advanced Defense Systems.

No investor would be allowed to hold more than 5 percent of either company. There have been attempts to sell parts of IAI in the past, but these efforts have been blocked by employees. This is the first time an IPO for Rafael has been seriously proposed. Both companies take part in the production of the Iron Dome anti-rocket system.

The Finance Ministry said the Government Companies Authority had valued IAI at between NIS 9.5 billion and NIS 11.4 billion in 2012.

According to the proposal for the latest Economic Arrangements Law, the treasury also hopes to privatize Israel Military Industries, a company in serious financial straits. But to do so, legislative changes concerning the company are needed first.

Electromagnetic frequencies

Meanwhile, the Economic Arrangements Law, which traditionally accompanies the state budget and includes issues dear to the Finance Ministry, is now being crafted. It will include a section on the communications industry that will focus on  regulation of electromagnetic frequencies.

The proposed law would require the Defense Ministry to transfer frequencies to civilian authorities and begin paying for using the frequencies still under its control.

Freeing up these frequencies would promote technological progress and make more efficient use of the spectrum, according to the draft of the Economic Arrangements Law.

The Defense Ministry would receive at least NIS 100 million for handing back frequencies in the 2,500 megahertz range. The actual amount would depend on how much the cellular companies bid in the tender for the frequencies, which they would use for fourth-generation services. In the past, the Defense Ministry was offered NIS 300 million for the frequencies, but rejected this as too low.

An Israel Aerospace Industries (IAI) Heron (Machatz-1) drone is pictured at the Singapore Airshow, February 14, 2012.Credit: Reuters

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