Since becoming Ministry of Defense director general in March, Amir Baram has led a substantial change in the pace of progress and plans for the initial public offering (IPO) on the Tel Aviv Stock Exchange (TASE) of Israel Aerospace Industries (IAI), the biggest government-owned defense company.
This week Baram convened a meeting of the CEOs of israel’s four biggest defense companies – IAI, Elbit Systems (TASE: ELST; Nasdaq: ELST), Rafael Advanced Defense Systems and rocket propulsion company Tomer to discuss performance in the operation against Iran and draw conclusions. Sources have told “Globes” that during the meeting he expressed his unequivocal position that an IAI flotation is a necessary step despite attempts to limit the move, mainly by the Ministry of Defense Security Authority.
Senior defense officials would prefer a limited offering, but Baram is pushing for flotation of a 30% stake. Using the proceeds, he wants to expand the company’s production capacity, research and development, and its presence in the south, as well as allow it to buy subsidiaries.
Within two weeks to a month, a crucial meeting is expected to be held between Baram, the Accountant General of the Ministry of Finance, the Head of the Budget Division, the Payroll Supervisor, IAI CEO Boaz Levy, and workers’ committee chairman Yair Katz. The goal: a final outline paper. From now on, the Defense and Finance Ministries are expected to work together to maximize profits.
The valuation has jumped six-fold
IAI’s 15,000 employees are expected to receive a NIS 60,000 bonus, following the move, which seems increasingly likely after years of talking, since procedures stipulate that 3% of the proceeds from the offering will be allocated to employees. At the same time, another compensation model will be examined under the leadership of Government Companies Authority Director Roi Kahlon, which focuses on employee options that will be exercised subject to the company’s valuation within five years.
At this stage, the company’s valuation is estimated at NIS 60-80 billion – about six times the valuation given in the tender in which the underwriters who were supposed to lead the offering in 2021 were selected: Poalim IBI, Barak Capital, Leader Underwriting and Discount Capital.
Although the agreements with the four underwriters expired last year, it was recently decided to extend the agreement with them for several more years. At the same time, one of the main challenges in realizing the offering is the dollar exchange rate, which has fallen and, according to estimates, eroded about 10% of the company’s valuation in about two months. In order to ensure maximum value from the offering, one of the options being considered is to carry it out in phases – that is, to sell shares gradually over time, to avoid a situation in which the IPO price is too low.
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The politicians will decide
An issue that remains a major bone of contention is where the money will go. Baram wants all the revenue to be directed to defense, while the Ministry of Finance prefers to narrow the fiscal deficit. However, both sides have a common interest: both Baram and the Ministry of Finance would be happy to issue a larger share of the company. A significant factor that is not yet in play is the workers’ committee led by Yair Katz. From Katz’s perspective, there is no objection to a full IPO, since IAI has no real local rivals, unlike, for example, Ashdod Port. In addition, freedom from the regulation of the supervisor of wages at the Ministry of Finance would allow the committee to reward outstanding employees more freely.
Dudi Amsalem, the minister in charge of government companies who also serves as chairman of the ministerial committee for privatization, is interested in taking as many companies as possible onto the private market, and therefore, from his perspective, Rafael should also follow this path, and if IAI’s IPO goes ahead and fulfils Baram’s expectations, he is expected to accelerate Rafael’s IPO as well. For now, he is keeping his cards close to his chest.
Alongside security interests, Baram also has an indirect political motive. Minister of Defense Israel Katz, who appointed him, could score a significant achievement if the offering is successful ahead of the Likud primaries. Sources involved in the process estimate that on the political axis, Israel Katz is waiting for the opening shot from Yair Katz, who holds significant political power in Likud. Katz may bring the support of his functionaries provided that the workers approve the plan. When the conditions are ripe, Yair Katz will likely turn to the Minister of Defense for support.
The Salary and Labor Agreements Division at the Ministry of Finance said, “We are not aware that a decision has been made on the subject. There is no approval from all the relevant parties and certainly there is no agreement on such and such conditions for employees. When things become clearer, we will know how to respond accordingly. Regarding the removal of the supervisor of wages from the company, our position is different from that detailed in the article. I wish the issue of rewarding outstanding employees was the problem at IAI.”
Published by Globes, Israel business news – en.globes.co.il – on July 17, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
