Israeli private equity firm FIMI Opportunity Funds has flourished during the war due to its investments in the defense sector. Speaking to "Globes" capital market editor Shai Shalev at the "Going Long on Israel" conference, FIMI CEO Ishay Davidi said that foreign investors have recent begun returning to Israel in significant numbers.
"In the last three months, we have seen a trend of foreign investors coming back, as in prosperous, in large numbers. I hope that other events will not have an impact. This is a welcome period in which investors who pulled out on October 7 are returning, but they will identify whether or not there is stability," Davidi observes. FIMI is Israel's biggest private employer, with some 50,000 employees in about 50 factories, with 11 defense companies prominent among them: seven publicly traded and four privately owned.
In this sector, the company has needed to respond despite the challenges of the war. "From October 8, we set up an emergency headquarters that is updated daily, because of the responsibility we have," says Davidi. "When the war began, we had to deal with 2,000 people mobilized by the reserves and factories from Kiryat Shmona to Ashkelon and the Gaza border area, with missiles hitting the factories. There were also workers whose homes no longer existed, and were being evacuated. It was a complex process that was nothing like what we expected."
"No factory or company stopped for even a minute"
Davidi details the international challenges that tested the companies in FIMI's portfolio during the war. "We need to produce and bring goods from the east, but we had to go around Africa and some airlines and ships did not arrive. Not only are you boycotted from a defense perspective, but you also cannot attend exhibitions. Seven of our companies were supposed to present at the Eurosatory exhibition, but not only was it impossible to participate, it was not possible to even attend. In addition, suppliers from various countries stopped providing raw materials. All these processes have an impact, but no factory or company stopped for even a minute."
A prominent company that FIMI bought is Ashot Ashkelon (TASE: ASHO), which was acquired from Elbit and has since quintupled its market cap. "Elbit sees very well what it has achieved. On the other hand, we sold Tadiran Communications to Elbit and I estimate that they made a huge profit on it. We are also happy to sell good companies. In order for us to continue improving and selling, the buyer needs to be satisfied. Elbit sold Ashot Ashkelon because it is not in their field of focus. Ashot Ashkelon is in a sophisticated industry."
A notable recent investment by FIMI is the acquisition of 50% of Marom Dolphin for NIS 130 million. Davidi explains that part of the private equity firm's long-term view stems from the "neighborhood" in which Israel is located. "We assessed this many years ago and that is why we acquired defense companies. We are at war and will probably remain in an unfriendly environment to say the least, and Israel needs to be fully confident and technologically powerful against its enemies. We are the world's largest testing ground for the use of military technology."
On strategy during the war, Davidi says that as early as November 2023 FIMI made a decision to "go long on Israel." According to him, the Marom Dolphin deal reflects this. "We believe that acquiring a company during such a period over the coming years is the precisely right. Regarding exits, it is complex, the decision is not ours but the buyer's. Until 4-5 months ago, there were no real investors."
Looking ahead, Davidi explains that FIMI is not looking for a specific sector, and this is reflected in the 14 sectors in which they operate. "Starting with Covid and during the war in the world and also in Israel, it is clear that the medical sector is good, with the four companies that we have. Alongside this, the defense sector stands out, and we will continue to invest in it."
The conference is held in collaboration with Clal Insurance and is sponsored by One Zero bank and Ratio Energies.
Published by Globes, Israel business news - en.globes.co.il - on March 24, 2025.
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