The structure for the privatization of Israel Military Industries Ltd. (IMI) will be submitted to the government and the Knesset Finance Committee by the end of March, and the government will publish the tender for the sale of the company as a single unit by the end of the year. Under a deal reached between the Histadrut (General Federation of Labor in Israel), Ministry of Finance, Ministry of Defense, and Finance Committee members, measures will be taken to balance IMI's finances this year to make it more attractive to potential buyers and maximize the sale price.
Defense officials believe that at least ten Israeli defense companies will show interest in IMI. Possible bidders include Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), Samy Katsav's SK Group (which includes IMI light arms spin-off Israel Weapons Industries Ltd.; and Plasan Sasa Ltd., owned by Kibbutz Sasa. Government-owned Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) and Rafael Advanced Defense Systems Ltd. will not be permitted to participate in the privatization tender.
Preparations for the privatization of IMI will include erasing the company's more than NIS 1.1 billion debt to the state, and the firing of almost 1,000 employees. The Finance Committee's decision today to approve a NIS 300 million loan for IMI is part of the privatization structure. It includes NIS 150 million advance from the Ministry of Defense for future munitions procurements, and NIS 150 million from the Ministry of Finance, which will be considered as a partial repayment of IMI's debt to the state, and will offset from pension payments to IMI retirees.
More than NIS 10 billion has been injected into IMI over the past 20 years, and there have been ten privatization plans for the company.
Today's loan will enable IMI to buy raw materials for three months, ensuring production and the regular payment of salaries. Finance Committee members believe that industrial quiet and certainty during such a sensitive period will create a better climate for formulating the final format for the company's privatization.
The agreement, its timetable, and articles was reached in the past few days. Sources close to the deal said that all the key parties in talks, including those who previously threatened to torpedo any privatization of IMI, have agreed to the terms. The terms include 950 voluntary retirements of employees already designated as redundant, and a safety net the remaining 1,050 employees and guarantees of their rights by the company's new owners. If the new owners decide to make layoffs, the employees will keep their right to NIS 1 million severance per employee.
"Financial agreements have been reached to share the cost of saving the company between the ministries of finance and defense," said MK Shay Hermesh (Kadima), who has led the special parliamentary team for expediting IMI's privatization over the past several weeks. He said that today's agreement and the NIS 300 million transfer would "put an end to the monthly ritual of proving a last-minute loan to pay salaries, and will make it possible to reach agreements on continuing the privatization."
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2012
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