The acquisition of a stake in Elisra Electronic Systems will probably propel Elbit Systems (Nasdaq: ESLT) further along the way to becoming Israel’s premier defense company. Elbit Systems was the first Israeli company to act on the merger and consolidation trend in the global aerospace-defense industry in the past decade. The acquisition of El-Op Electro-Optic Industries was the most prominent of its acquisitions.
Ministry of Defense officials responsible for Israel’s defense industry have been unsuccessfully trying to carry out similar measures in government companies: Israel Aircraft Industries (IAI), Rafael (Armament Development Authority) and Israel Military Industries. But the lack of advanced management skills has prevented the government defense industries from carrying out business measures that are routine for Elbit Systems, such as acquiring a company with a complementary business, or buying out a competitor.
Elbit Systems’ latest acquisition was to complete its ownership of Ortek, after buying DRB’s (of the Steinmetz group) 25% stake in the company. Ortek develops electro-optical devices for monitoring security at installations and borders. The acquisition will allow Elbit Systems to expand its basket of products for the security market. Elbit Systems currently produces command and control systems, aviation and satellite reconnaissance systems, unmanned aerial vehicles (UAVs), electro-optical devices, and computerized border security systems.
Last year, Elbit Systems acquired El-Op, plus other Israeli companies, including Carmiel-based Cyclone Aviation Products, which builds aircraft components and provides aircraft and helicopter maintenance services.
It seems that Koor Industries (NYSE: KOR ) prefers Elbit Systems as a partner in Elisra over IAI, which reportedly was also interested in acquiring the company. The main reason for Koor’s preference not to sell holdings to IAI was criticism in Koor that such a sale contradicted the policy of competition in the defense industry. IAI controls Elta Electronics Industries, Elisra’s main competitor in electronic warfare systems.
The same sources said, “It is necessary to preserve healthy competition in Israel between two competitors, rather than two groups under joint management.” They believe that a merger of Elisra and IAI contradicts the privatization policy, and would actually constitute a nationalization of the electronic warfare sector.
The Elbit Systems group
100% of El-Op Electro-Optic Industries, a manufacture of electro-optic devices and armor upgrades 100% of Silver Arrow LP, a manufacturer of UAVs 100% of Cyclone Aviation Products, a manufacturer of aircraft components 51% of Kinetics, a manufacturer of advanced environmental control products and hydraulic products for armored vehicles 75% of Ortek, a manufacturer of optical security systems (now 100%) 50% of SCD, a manufacturer of infra-red detectors for thermal imaging devices and laser diodes 100% of Fort Worth, Texas-based EFW, a defense contractor A controlling interest in Aeroeletronica – Industria de Componentes Avionicos S.A. (AEL) of Brazil, a manufacturer of advanced defense electronics systems. 100% of ESL Advanced Information Technology (ESL-AIT) of Austria, a manufacturer of command and control, software-intensive and telecommunication systems for the regional market. 54% of AE Electronics of Romania, a logistic center and depot level repair facility. 100% of Elmet International of Romania 100% of Simultec of RomaniaPublished by Israel's Business Arena on 8 April 2002