Israeli Defense Firms Accelerate Production and Eye Public Listings Amid Prolonged Conflicts
Israeli defense industries are rapidly expanding production capacity and considering stock market listings to meet the growing demand for armaments driven by prolonged regional conflicts. Tomer, a state-owned rocket engine manufacturer, recently joined veteran companies Rafael and Israel Aerospace Industries (IAI) in discussions about public offerings. Tomer produces classified components such as engines for the Arrow 3 and Barak MX air defense missiles, as well as precision artillery rockets for Elbit Systems. It was separated from the military industry in 2018 to maintain strategic control over critical propulsion technology.
The shift toward public listings reflects the need to raise capital quickly to scale production amid ongoing wars like those in Ukraine and the Middle East. A senior defense industry official told Calcalist that the sector must transition from producing high-tech boutique weapons to mass manufacturing at lower costs to supply the front lines. Since the outbreak of regional hostilities on October 7, Tomer has doubled its workforce from 500 to 1,000 and expanded production lines, becoming a bottleneck in missile and rocket manufacturing.
Israel Aerospace Industries exports Arrow 3 missiles to Germany and Barak MX systems globally, while Elbit supplies artillery rockets to European armies preparing for potential Russian aggression. The looming possibility of renewed US-Iran conflict, with Israel potentially involved, underscores the critical need for interceptor missile stockpiles. Interceptor missiles like Arrow 3 cost $3-4 million each, THAAD $12-15 million, and advanced SM-3 missiles even more, with production cycles of two to three years.
Former Israeli Air Force air defense commander Brigadier General (res.) Ran Kochav emphasized the necessity of the "small, simple, cheap, and mass-produced" approach to meet sustained conflict demands. The Defense Ministry, which owns these companies, faces pressure to reconsider its traditional resistance to exposing defense firms to capital markets due to security concerns. The ministry must balance budget constraints, the army's urgent need for large inventories, and the shift to efficient mass production.
While IAI is closest to an official government decision to list shares, Rafael’s potential IPO remains uncertain amid government hesitations and valuation challenges. Industry insiders believe the Defense Ministry will have to redefine its red lines and embrace market mechanisms to ensure Israel’s defense readiness in this new era of prolonged warfare.
