The Israeli government has begun the process of selling Israel Military Industries, the original manufacturer of the Uzi submachine gun, in a sale that values the company at some 2 billion shekels ($540 million).
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Ori Yogev, the director of the Government Companies Authority, said the government had approached a handful of international investment banks, among them Merrill Lynch, BNP Paribas, Citibank and UBS, about managing the sale, which is slated to occur next year.
“After many long years, we are taking a significant step today in selling IMI as a company investors will find attractive and which will operate, after its sale, as a defense company in a competitive marker” Yogev said in a meeting with IMI executives last week.
Other banks that were approached to manage the sale included Rothschild, Deutsche Bank, Morgan Stanley, Credit Suisse, Barclays, JPMorgan and Houlihan Lokey.
The sale comes as the government embarks on its biggest privatization initiative in well over a decade. 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 approved IMI’s privatization months ago and has been laying the groundwork for the sale of the company for some time, with preparations that include restructuring and efficiency measures.
Around 100 IMI employees are being laid off every month, with the target of reducing worker numbers by 600 by the end of the year.
IMI, whose products range from ammunition to guided missiles, will be sold directly to an investor or an investor group. Despite the company’s key role in Israeli defense, the government has agreed that foreigners can bid for the company subject to management and other limitations.
Under the terms of the privatization plan, not only Israeli companies will be allowed to acquire control of IMI but also foreign individuals or foreign companies that operate through a locally incorporated business, which they will be permitted to hold up to 90% of the equity.
Among the candidates to buy IMI are the Israel’s Elbit Industries, a defense electronics maker and Israel’s biggest private sector defense company, Israel Shipyards and the entrepreneur Sami Katsav, who bought IMI’s Uzi business in 2005 and now produces it through closely held Israel Weapon Industries.
Even after IMI is sold, the Defense Ministry has undertaken to buy 550 million shekels of equipment annually through 2018. IMI operations will be transferred into a new corporation to be called IMI Systems, free of the debt IMI has run up with the government. IMI will move it operations over the next eight years from Ramat Hasharon, near Tel Aviv, to Ramat Baka, south of Be’er Sheva.
Some of IMI’s most classified projects will be transferred to a new government company called Tomer.