Elbit Systems is prepared to pay 1.9 billion shekels ($550 million) to buy state-owned Israel Military Industries and has also agreed to spin off IMI’s missiles operation to ensure the deal goes through, sources close to the privatization deal told TheMarker on Wednesday.
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The issue of IMI’s missile business has been a major obstacle because it counts two other state-owned defense contractors – Israel Aerospace and Rafael – as customers, and they have expressed concern that Elbit would discriminate against them.
The Antitrust Authority, in a preliminary opinion, said it would likely approve the deal if the missile division is spun off, the sources said.
Under the terms of the deal being ironed out, IMI would spin out the missile business to a newly formed government company called Tomer. Elbit would retain some of the intellectual property, but most of it would be transferred to Tomer.
The final price of the IMI deal hinges on the company’s real estate, which the Finance Ministry is anxious to use for residential building to ease Israel’s housing crisis, sources said.
The final price that Elbit, Israel’s biggest private sector defense company, will pay will depend on how much the government gets from the sale of land in Tirat Hacarmel now occupied by IMI plant. The facility is slated to move to nearby Yokne’am when the takeover is completed.
In addition, the treasury is anxious for IMI’s main facility in the Tel Aviv suburb of Ramat Hasharon to be relocated to the Negev so that the land can be rezoned for housing. The government is prepared to pay the 1.8 billion shekel relocation costs on the assumption it will earn it back from selling the land.