Arrow Missile Engine Maker Tomer Seeks Up to $135 Million in Debt

Tomer, a state-owned company that manufactures engines for Israel's Arrow missile defense system, is preparing for its first debt offering to institutional investors to fund production capacity expansion. The company aims to raise at least 300 million shekels (approximately $81 million), with the maximum issuance set at 500 million shekels (approximately $135 million) by the Government Companies Authority. The fundraising is planned by year-end through institutional bonds, similar to Rafael Advanced Defense Systems, allowing Tomer to avoid becoming a public company and its associated disclosure requirements, given the classified nature of much of its operations.

The plan to raise capital via bonds began earlier this year, a joint initiative between Tomer's management and the Government Companies Authority. Roee Kahlon, the authority's director, revealed the plan two months ago, stating that Tomer's financial data indicated its readiness for public offering. However, officials from the Finance and Defense ministries expressed less enthusiasm, citing the circumstances of Tomer's establishment.

Tomer was founded about a decade ago when Israel Military Industries (IMI) was privatized and sold to Elbit Systems. The rocket propulsion and missile engine production, considered a unique national knowledge center, was excluded from the sale and remained under state ownership. The current bond issuance plan is seen as a compromise, balancing the state's security interest in maintaining classified operations with the company's need for capital to grow.

Tomer is a key subcontractor for Israel Aerospace Industries and Elbit Systems, producing engines for the Arrow 3 and Arrow 4 missiles, the Shavit satellite launch vehicle, the Barak MX, the RAMPAGE air-to-ground missile, and artillery rockets for the PULS system. Increased global demand for missile systems, driven by an arms race, has led Tomer to expand its production lines and workforce to approximately 1,000 employees. This expansion is also influenced by the Israel Defense Forces' procurement of Arrow missiles and a significant sale of these systems to Germany totaling around $7 billion.

Tomer's sales have reached approximately 850 million shekels ($230 million) so far this year, exceeding its target by about 150 million shekels ($40 million). The company projects sales to reach 1.8 billion shekels ($485 million) by 2030, with its workforce growing to 1,400. Mayeen Harel, deputy director of the Government Companies Authority, has set a target for Tomer's leadership to complete the fundraising of at least 300 million shekels by year-end, which could increase executive bonuses by up to 20%.