Israel Aerospace, Tata in Joint Military Firm

The IAI will initially put up $16 million for a 26% stake in the firm, with the Tata Indian partner holding the remaining 74%.

The Israel Aerospace Industries board yesterday approved initial investment up to $50 million in a joint venture with Tata Advanced Systems, a subsidiary of the Indian conglomerate, Tata. The new jointly-owned firm, to be named Nova Integrated Systems and based in India, will establish development, production, marketing and sales operations for missile systems, radar, electronic warfare and security systems, following the IAI's business paradigm. The two firms plan to invest up to $1 billion.

The IAI will initially put up $16 million for a 26% stake in the firm, with the Indian partner holding the remaining 74%. If Indian law is amended to allow foreign companies to do so, the IAI will make use of the option to increase its stake in the firm to 50%. IAI has also undertaken to provide financing or guarantees of another $20 million, matched by the Indian partner.

The funds will be used to establish infrastructure, buy equipment and land and finance labor costs . Once the shares have been allocated, the board will be comprised of four-12 directors to be appointed based on each company's relative shareholding. The IAI will have a veto right in the board's important decisions. The CEO will be jointly appointed and its chief financial officer will be appointed by IAI, which is entitled to appoint an observer to the new company's board until shares have been allocated and the investment transferred.

The IAI is now waiting for final approval of a huge $1.5 billion sale of advanced security systems to India. Final approval has been delayed following publication of findings that allegedly point to bribes paid by IAI to procure tenders. Indian authorities have recently reopened the agreement, aiming to trim IAI's price tag, and the IAI has delayed delivery of Airborne Warning and Control (AWAC) planes to India. The Indian press reports that the first of three spy planes have already been delivered, but IAI declined to confirm the report. According to earlier reports, the delivery of the first plane was delayed because of faults in the plane's systems, which were discovered and repaired.