Shower of Red Ink for Military Industries Buyer?

Send in e-mailSend in e-mail
Send in e-mailSend in e-mail

A privatized Israel Military Industries will not reach profitability until 2016 and will lose at least 250 million shekels ($72 million) in 2014, said sources close to the privatization process at the state-owned defense company.

IMI is expected to balance its books in 2015 and produce a profit of 50 million to 100 million shekels in 2016. The large losses forecasted for 2014 stem from the costs in transforming it from a government owned corporation into a private sector company and surplus manpower.

The state is also expected to forgive IMI’s debts of 2.75 billion shekels ($790 million) as part of the reorganization process, which will see the company split into three. The old IMI will retain the company’s debts. The new IMI Systems will receive the company’s operations which will be privatized. A third company to be called Tomer will be operated by the Defense Ministry and will take over some of IMI’s rocket propulsion lines, as well as its production of tanks and armored vehicles.

IMI will be reorganized in the coming weeks, with the number of divisions reduced from five to two and a half. One division will be devoted to land-based weapons systems and armaments. Another division will be dedicated to air-based systems, including missiles, unmanned aerial vehicles and rocket propelled weapons that are not be turned over to Tomer. The third division will handle light ammunition manufactured at the company’s Yitzhak factory. IMI will also reduce its workforce this year through layoffs and early retirements that will include severance payments to workers of 1 million shekels each.

The estimated sale value of a privatized IMI is between 1.5 and 3 billion shekels ($430 million and $860 million), due largely to the value of the company’s intellectual property. Among the companies or individuals who have expressed interest in submitting bids for IMI are Elbit Systems, Mivtach Shamir Holdings and arms mogul Samy Katsav’s SK Group.

A privatization tender for IMI is expected to be announced near the end of 2014 and a winner is expected to be announced by the end of 2015.

Advanced Israel Military Industries weapons systemsCredit: Moti Milrod

Click the alert icon to follow topics: