Yair Shamir: I can privatize Israel Aerospace Industries

Shamir wants to float IAI on Nasdaq, but Defense Minister Ehud Barak is reportedly seeking a new chairman.

Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) chairman Yair Shamir told "Defense News" that if he is renominated for another six year-term, the IAI privatization plan will succeed.

Shamir's six-year term as IAI chairman expires in less than two months. He was appointed by then-Defense Minister Shaul Mofaz, a political rival of Minister of Defense Ehud Barak. Barak has the right to appoint the chairman of IAI, and if he opts to replace Shamir - whom "Defense News" describes as "influential and fiercely independent" - political and labor leaders alike warn it could take years for new management and IAI's notoriously recalcitrant labor union to come to terms acceptable to government owners.

Shamir told "Defense News", "In order to start the process, there are some preconditions; and - like most things in life - it all boils down to personalities. The Government Companies Authority and a ministerial committee on privatization have to grant us waivers from existing laws, but in order to do that, they need assurances from the union that they will be agreeable."

Defense industry sources told "Globes" that Shamir has decided to launch an open struggle against Barak, and not just to keep his job, but mainly to achieve what he considers his life work, given assessments that Barak will not extend his term. These assessments say that Barak is considering for the post former national security advisor Major General (res.) Giora Eiland and current external advisor to Givot Olam Oil Exploration LP (TASE:GIVO.L).

"Shamir devoted six years of his life to achieving the privatization of IAI, a move that would prod the privatization of Rafael Advanced Defense Systems Ltd. and Israel Military Industries Ltd. (IMI), and take credit for the very strong achievements in promoting the company," one source said. "He isn't prepared to sit and shake hands in view of what he considers as a move that not based on the merits of the issue."

Shamir told "Defense News", "We've reached a unique situation where we have a basic understanding with the employees and the Government Companies Authority to go public. I say on Nasdaq, some others say the Tel Aviv Stock Exchange - this is one of the open issues.

"But the idea is to give us two years of an incubation period to prepare for our initial public offering. During that time, we'll finalize a detailed agreement with employees, do more streamlining and efficiency, reduce many of the government-imposed barriers and institute other procedures to maximize value before going public."

Shamir added, "The understanding is that after the two-year incubation, we will offer the public 25-30% of the company in an IPO, and in five years, the government will go down to slightly less than 50%.

Shamir said, "I'm running a $3 billion-plus company, doing more than 80% exports, and providing livelihoods for some 40,000 households - and I have the executive maneuvering room of a small municipality or regional council. It's crazy.

"Because we're restricted by government salary scales, our engineers working on the most sensitive, cutting-edge programs earn the same pay as an engineer working for a local township. This makes it virtually impossible to recruit someone from the outside. I also can't pay bonuses or award scholarships to worthy students."

Published by Globes [online], Israel business news - www.globes-online.com - on June 1, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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