IMI to Merge into Rafael?


Israel’s Globes business daily newspaper reports tonight that the Ministry of Finance and Ministry of Defense have agreed on a plan to merge Israel Military Industries Ltd. (IMI) with Rafael Advanced Defense Systems Ltd. The plan is also endorsed by IMI’s union representatives. A formal announcement is expected by the end of the month.

In the past the ministry of Finance insisted IMI should be privatized, a procedure that was not accepted by the unions nor by the ministry of defense, which supported merging the company with one of the country’s two government owned companies – IAI or Rafael. Merging of IMI with privately held Elbit Systems also encountered opposition on privatization grounds.

Both IAI and Rafael companies expressed interest in acquiring IMI, whose portfolio closely matches both company’s activities. It is anticipated that by merging IMI’s activities within Rafael, IMI could become financially stable.

Based primarily of land systems, IMI’s portfolio includes armored vehicles design, integration, and modernization. In recent years the company was associated with some of the world’s largest main battle tank, artillery and rocket systems modernization programs, in Turkey, several Asian countries, and Eastern-Europe. These areas are synergistic to Rafael’s lines of activities. However, IMI is also producing a range of passive, reactive and active protection systems, countering IEDs, RPGs and anti-tank threats. IMI Wave remote weapon systems line also conflicts with Rafael’s RCWS products.

In the field of countermeasures, both companies have complementary activities, with Rafael developing aerial DIRCM while IMI is leading the field in expendable countermeasures (chaff and flares). In these areas, both companies are fierce competitors, a bitter fight is raging between the two on the development of an active protection system for the Namer. IMI is also a provider of aerial weapons and bunker penetration warheads for Rafael’s Spice precision guided aerial weapons family.

But again, in the associated field of missile and rocket propulsion, both companies have competing operations. IMI is also sole source subcontractor for large solid-fuel propulsion systems, for the Arrow II missile interceptor, as well as other rocket propulsion systems at IAI.

Despite the company’s past difficulties, IMI has an order backlog of over $1.3 billion. IMI is also a major supplier of weapon systems for the IDF land forces, and many foreign armies. IMI has also developed close relations with many foreign military establishments, through the integration of large scale modernization programs, primarily with land systems.