New IAI chairman paves way for privatization

Source: Dov Baharav believes that a determined effort must be made to privatize IAI, and that he has the means and backing to do it.

New Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) chairman Dov Baharav has taken steps in the past few weeks, which could be summed as "laying the groundwork" for talks on privatizing the company. Sources at IAI believe that no date has been set for the start of talks on the subject, but that his actions are causing tensions at the company.

Baharav quickly hired Motti Scherf as an external media advisor to prepare the PR strategy for the privatization. Scherf worked for Barahav when he was president and CEO of Amdocs Ltd. (NYSE: DOX) and they have a good relationship of trust.

IAI employees are uncomfortable that the new chairman has already hired a media advisor, even though no talks have been opened with the workers committee about the structure of the company's privatization. A top source close to IAI believes that Baharav will have a long way to go to persuade IAI's strong workers committee, and that the road will be full of exhausting crises.

The source said, "You don’t build trust with such an organization within two weeks, or over a cup of coffee. It's a long process, maybe a year or two. You need chemistry. If there are no such understandings, without complete trust between management and the board of directors and the workers committee - you'd better not move."

Sources at IAI told "Globes" that Baharav will open direct talks with the workers committee in an effort to reach agreements.

Baharav was appointed IAI chairman during the summer, replacing Yair Shamir, who had held the post for six years on an unpaid basis. Baharav, in contrast, will be paid, on the grounds that he will work full-time for the company, whereas Shamir was simultaneously chairman of Catalyst Investments LP.

Baharav has the full support of Minister of Defense Ehud Barak and Minister of Finance Yuval Steinitz, who jointly appointed him to the post, and they expect him to privatize the company. Shamir was leading a privatization plan, and said before his departure that he could complete it within a year, thanks to the relations of trust he developed over a long period with IAI's workers committee and its chairman, MK Haim Katz (Likud).

A few days ago, a source close to IAI said, "There is already broad agreement between the parties involved, including the Government Companies Authority and acting Ministry of Finance director general Doron Cohen that there is no choice but to privatize IAI. There is something fundamentally wrong for such a company that is subject to government regulations and strict limits to simultaneously operate in a very competitive environment."

Another source close to IAI told "Globes", "Baharav is afraid that IAI's current standing and future growth are in doubt, because it will hit a glass ceiling from which it will then fall. He believes that before reaching such a dangerous situation, a determined effort to privatize must be made, and that he has the means and backing to do it."

Published by Globes [online], Israel business news - - on October 27, 2011

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

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