Rafael beats IAI to Aeronautics acquisition

Aeronautics Photo: PR

Rafael and Avichai Stolero have agreed a valuation of NIS 850 million for Israeli UAV company Aeronautics, sending its share price soaring.

Rafael Advanced Defense Systems Ltd. and Avichai Stolero will buy Yavneh-based UAV company Aeronautics (TASE: ARCS) at a valuation of NIS 850 million. The two sides signed an agreement last night after negotiations that lasted months. Aeronautics, which is the subject of two investigations by the Israel Securities Authority and Israel Police, will be sold to Rafael and Stolero at a price that represents a 70% premium on its market cap. In response, Aeronautics' share price is up 37% on the Tel Aviv Stock Exchange this morning.

The agreement on price is subject to due diligence, regulatory approvals, and the signing of a binding merger agreement approved by the boards of both sides. On completion of the deal, Aeronautics' shares will be delisted from the Tel Aviv Stock Exchange and it will become a privately-held company.

The negotiations between Aeronautics and the buyers, Rafael and Stolero, began last summer, when the latter made an offer at a valuation of NIS 430 million to buy Aeronautics from the Bereshit, Viola and KCPS funds. Aeronautics' board rejected the offer on the grounds that it was too low.

In recent weeks, Aaron Frenkel bought 20% of Aeronautics for NIS 100 million, and at the same time Israel Aerospace Industries (IAI) expressed interest in acquiring the company's business, while US giant KKR conducted talks with Aeornautics and Rafael on buying their jointly-owned subsidiary Controp, whicj develops and produces electro-optic systems.

IAI and Rafael are both state-owned companies. The rival bids they made for Aeronautics sent the latter's share price soaring from the level it was at when Rafael made it original bid.

Rafael is one of the most prominent of Israel's state-owned companies, and the Government Companies Authority recently decided to demand from it a payment of an exceptional dividend of some NIS 500 million in 2019. Rafael's board rejected the demand in order for the company to be able to invest in development and expansion. Rafael chose to carry out the Aeronautics deal in conjunction with Stolero in order that restrictions that apply to government companies would not apply to Aeronautics as well.

Published by Globes, Israel business news - en.globes.co.il - on January 13, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Aeronautics Photo: PR
Aeronautics Photo: PR
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