Israeli Defense Firms See Intense Boardroom Battles Ahead of IPOs

As Israel approaches national elections, government attention focuses on the country's leading defense companies, particularly Israel Aerospace Industries (IAI) and Rafael Advanced Defense Systems, both reporting record revenues. With IAI's potential initial public offering (IPO) looming, board seats at these firms have become highly coveted, sparking political competition. Notably, a political dispute between David Amsalem and Israel Katz over IAI's chairmanship and unsuccessful attempts to appoint former ministers Gilad Erdan and Silvan Shalom highlight the stakes.

The government’s appointments committee, chaired by retired judge Shlomit Dotan, has reviewed various candidates recommended by ministers. Former Deputy Minister Leah Ness was nominated to IAI’s board but failed to secure approval. Retired Major General Yitzhak Turgeman, ex-head of the IDF’s Technology and Logistics Directorate, was approved pending cessation of consultancy services to the company. He will join alongside Gili Goldstein, a former senior defense official.

At Rafael, preparations for an IPO have intensified boardroom maneuvering. Avraham Manela, a well-connected figure with ties to the Gur Hasidic sect and Avigdor Lieberman, was nominated to Rafael’s board after being blocked from another term at the Israel Electric Corporation. His appointment is linked to that of Ela Gur Aryeh, an aeronautical engineer with decades of defense industry experience, who is expected to provide professional balance to Manela’s political nomination. Gur Aryeh must resign from her advisory role at the government-owned rocket propulsion firm Tomer, which recently also announced IPO plans.

The government aims to increase transparency and corporate governance ahead of these IPOs, which are part of a broader strategy to raise billions for strengthening the Israel Defense Forces. Last month, retired Brigadier General Guy Bar-Lev was appointed IAI CEO, replacing Boaz Levy, who became chairman. The government also approved merging Elta Systems into IAI to boost its valuation to approximately $20 billion, targeting a 25%-30% public offering.

Former minister and Rafael chairman Yuval Steinitz emphasized the IPO’s critical role for Rafael’s survival, noting support from the Companies Authority and Prime Minister Netanyahu. He stressed the need for flexibility to compete with global defense giants like Elbit Systems and Lockheed Martin, which frequently acquire and divest companies. These moves reflect a growing trend of political involvement in defense sector management amid efforts to expand Israel’s defense budget by 350 billion shekels over the next decade.