"In my view, IAI has not benefited from its acquisition of Elisra shares. The promised synergy with [IAI subsidiary] Elta never materialized and was nonsense to begin with. Also, the rationale that it blocked the competition [Elbit Systems] from access to a critical market is weak," Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) chairman Yair Shamir said in an interview with "Defense News".
This is the first time that an IAI executive has spoken out so openly and bluntly about the dismal deal, which has resulted in the resignations of five IAI executives. IAI has been trying to sell its Elisra Group shares for a long time, and has been in talks with its partner in the company, Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), on the matter.
Shamir added, "Had IAI been assured additional purchases up to 50 percent, it could have been a successful venture. But as it now stands, it merely weakens Elisra, prevents Elta from competing in certain markets, and drove the value of our investment down to nothing. If there is an opportunity to sell, I will recommend to the board that we do so."
In response to "Defense News'" question, "Even at a loss? And even if it means strengthening Elbit Systems, your domestic rival?", Shamir replied, "Over the past two years, we've written off nearly 60% of this investment, so it's already a loss. If Elbit or anyone else comes in with a reasonable offer, it would be duly considered."
Defense industry sources told "Globes" that Shamir's comments indicated that IAI was raising the ante in its efforts to get rid of Elisra, come what may.
Shamir also lambasted IAI's salary structure, which he inherited from his predecessor, Moshe Keret, in 2006. Shamir says that continued government control of IAI prevents him from instituting structural reform in the company's pay structure.
Published by Globes [online], Israel business news - www.globes-online.com - on March 6, 2008
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