Privatization Czar Says There Is Strong Interest in Israel Military Industries

The government’s planned sale of one of the country’s largest defense contractors has received interest from more than 20 Israeli and foreign entities, Israel’s privatization chief said Wednesday.

• Israel to privatize $4b worth of government companies
• Former union boss, industry leader among likely bidders for Israel Military Industries
• Israel to privatize $4b worth of government companies

A decade after its last privatization program, the government intends to sell all or part of eight companies and two ports by 2017, raising around $4 billion. Among them is 82-year old Israel Military Industries, developer of the Uzi submachine gun and other arms and ammunition, although IMI’s security-sensitive units are being folded into a new state-owned company. The government expects IMI to command between $400 million and $650 million.

Ori Yogev, head of the Government Companies Authority, said most of the interest had come from foreign firms and the state would launch a road show in Israel and the United States in the next few days. Yogev said he believes the sale will be completed by the end of the year.

Local media reported that those interested included Elbit Systems , Israel’s largest publicly traded defense firm, private equity firm Apax Partners and Israeli private equity fund Fortissimo. Leumi Partners and Stifel Investment Banking are serving as advisers on the sale.

IMI was the worst performer among state-run companies in 2014, losing 2.45 billion shekels ($633 million).

Overall, the 87 companies in government hands improved in 2014, posting a combined net profit of 432 million shekels compared with a loss of 592 million in 2013. Revenue was virtually flat, at 68.4 billion shekels.

Profit is forecast to grow to 1.06 billion shekels this year. Helping the turnaround was utility Israel Electric Corp, which posted a profit of 151 million shekels in 2014, as compared with a 936 million shekel loss in 2013. The government plans to sell 25% of the electric company in 2016, but it is dependent on structural reforms at the company. In May, the electric utility is planning to sell up to 1 billion shekels of bonds via the Tel Aviv Stock Exchange, which would be the first time in a decade that it issues tradable bonds in Israel.

“It’s a very important step for IEC to come back to being a very strong company and end the financial crisis that they had,” Yogev said.

At a news conference, Yogev said the average annual salary of government company workers slipped 2% in 2014, to 310,000 shekels. That compares with a 2% rise, to 117,000 shekels, in the rest of the economy.