The contest in the privatization tender for Israel Military Industries Ltd. (IMI) is between companies that want a discount on the price before the sale and Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), which can ask for the same discount, and more, after the sale. IMI is "worth" more to Elbit Systems than it is to any other bidder.
IMI not only multiplies Elbit Systems' power and makes it Israel's largest and strongest defense industry, it also increases its power and global sales capability. IMI develops advanced rockets that Elbit Systems does not have, airborne bombs, precision multi-purpose tank shells, and accurate light ammunition.
IMI gives Elbit Systems defense manufacturing facilities and professional personnel. IMI makes Elbit Systems much more than just Elbit Systems. When the other candidates talk about the price now, the purchase price in the tender, Elbit is therefore keeping mum. Its ability to pay and the worthwhileness for it to pay are clearer. It could be that Elbit Systems is counting on buying IMI at list price plus - the price that other bidders are complaining about and fleeing the tender because of it, but after making the purchase, it will obtain the ability to get the "discount" on the price and the range of products it sells to the defense establishment.
Thus it is that while the bidding groups have the power to exert pressure on the price now, a moment before the tender, Elbit Systems will have the ability to exert pressure on the price later, when it has become the largest and strongest defense industry in Israel.
In any case, the probe by the State Comptroller and the Ministry of Finance director general should be conducted quickly. They have to finish this affair this week in order to avoid torpedoing the entire tender. Later, when the highest bidder is declared the winner, the matter will be referred to the Antitrust Authority director general and the overconcentration committee. And then… who knows?
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2016
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