Israel Military Industries Ltd.'s (IMI) board of directors will convene this week to approve the privatization plan for the government company. The board meeting will precede the meeting later this month of the ministerial privatization committee, chaired by Prime Minister Benjamin Netanyahu, and with Minister of Finance Yair Lapid and Minister of Defense Moshe Ya'alon.
IMI's privatization plan was reached in consultation with the employees and the Histadrut (General Federation of Labor in Israel), after meetings over the past year.
The IMI privatization plan, which will be submitted to the ministerial privatization committee, calls for the establishment of a new company, New IMI, which will handle all of IMI's business operations, but without the burdens which have hindered its activity. At the same time, the Ministry of Defense will establish a unit to protect the state's interests in New IMI and its national defense infrastructures; IMI's Givon unit will not be sold, but will continue to operate as a Ministry of Defense-supported unit; the government will fix IMI's capital structure; IMI will vacate its site in Ramat Hasharon and transfer its operations to the Negev by 2020.
The Ramat Hasharon site has been contaminated by IMI's operations over the decades, and it will have to be decontaminated before rezoned for residences.
The privatization plan also calls for the government to write off NIS 2 billion in IMI's debts, mostly owners loans from the Ministry of Defense and Ministry of Finance to enable the company to meet its payroll and buy raw materials.
The sale of IMI, if it goes ahead, will include subsidiary Ashot Ashkelon Industries Ltd. (TASE: ASHO), a successful company that posted a net profit of NIS 7. 6 million for the second quarter of 2013, after posting a profit of NIS 36 million in 2012.
IMI today attributed the progress in its privatization to the efforts by new chairman Maj.-Gen. (res.) Udi Adam and CEO Avi Felder, as well as by defense and finance ministers. "The train has left the station, and we're nearing the moment of truth, after years of talks, discussions, and plans. This is the right move," a source close to the privatization told "Globes" today.
After the ministerial privatization committee approves IMI's privatization plan, it will be submitted to the cabinet and the Knesset, after which, in a few months, a tender will be published for the sale of the company.
The privatization plan includes the voluntary retirement of 950 of IMI's 3,000 employees, at cost previously estimated at NIS 1.1 billion. A group of 1,050 employees will receive a safety net in the same amount to guarantee their pensions after the company is sold. An external NIS 830 million safety net, which will be managed by a trustee, will be established to guarantee the rights of longstanding employees who will retire.
A source close to the privatization recently said that the plan is worthwhile for the government. "The cost of preparing the company for privatization is a fraction of the huge amounts that the government will make from the sale of IMI's site in Ramat Hasharon, which is some of the most expensive land in Israel," he said.
The government decided to privatize IMI in 2005, but fierce objections by its employees and the Histadrut stymied the plan. A source close to the privatization said today, "In 2005, there was an attempt at a forced privatization of the company by fait accompli. This time, the process is the reverse, in which all the groundwork was completed, agreements were reached with all the parties involved, and all the government has to do is to decide on how to execute the process."
Published by Globes [online], Israel business news - www.globes-online.com - on September 8, 2013
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