Gov’t, Histadrut back IMI-Rafael merger

Consolidating the military companies would make Israel a bigger player in the global defense industry, ministries believe.

January 20, 2011 22:18
2 minute read.

Tanks 311. (photo credit: Ariel Jerozolimski)

The Finance Ministry together with the Defense Ministry and the Histadrut Labor Federation on Thursday decided in favor of merging Israel Military Industries Ltd. with Rafael Advanced Defense Systems.

A joint inter-ministerial team comprised by representatives of the Treasury and the Defense Ministry examined the merger options of IMI with one of the country’s two government-owned companies – Israel Aerospace Industries Ltd. or Rafael – from an economic and security aspect as well as from the perspective of what’s best for the workers.

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IMI has been suffering multi-year losses and in 2009, the government had to provide a cash injection for the defense contractor to pay workers’ salaries.

After long discussions, the team recommended merging IMI with Rafael because of the possible synergies between the two companies, while IAI had also shown great interest. Consolidation of IMI and Rafael would avert the duplicity of creating competing defense systems. IMI and Rafael are competing in their attempts to develop an anti-tank missile defense system for the Israel Defense Forces.

At a presentation meeting in Tel Aviv on Thursday between Defense Minister Ehud Barak, Finance Minister Yuval Steinitz and Histadrut Labor Federation chairman Ofer Eini, it was decided to approve the team’s plan and advance the merger of IMI with Rafael. It was also agreed that, in two weeks, the plan will be presented for approval to the cabinet. During he next two weeks, Steinitz and Barak will meet with the management of the relevant government-owned companies – IMI, Rafael and IAI – to hear their positions on the team’s recommendation.

Following the cabinet decision, the merger process will be started in cooperation with the Histadrut Labor Federation.

The merger plan is part of a consolidation process of government defense companies taking place around the world. A merger would make the Israeli defense industry a bigger player in the global defense market and facilitate the bidding for large tenders in emerging markets.

The Finance Ministry previously had plans to try and privatize IMI in the form of a tender process. However, in light of continued losses at IMI over the past ten years reducing the company’s value and opposition by the workers and the unions, as well as the Defense Ministry, the option was not followed up. One of the private companies waiting in line for the acquisition of IMI was Elbit Systems, who has been IMI’s subcontractor on a number of projects .

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