IAI mulls teaming with China's AVIC on exec jets


Aviation Industry Corporation of China is the country's largest defense and aerospace company.

Committee for Examining Appointments at Government Companies chairperson Judge (ret.) Bilhah Gilor revealed in the reasons she gave for disqualifying the candidacy of Yair Shamir for chairman of Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) that IAI was trying to develop a new executive jet in cooperation with a Chinese company. The venture is still under consideration by IAI, and it will be brought before IAI's board of directors for discussion in the coming months. In the framework of the proposed venture, IAI will invest in the development of the executive jet together with China's largest aerospace company, Aviation Industry Corporation of China (AVIC), which is completely owned by the Chinese government.

The information about the new venture was exposed to the committee by the Government Companies Authority, headed by Ori Yogev, who opposed Shamir's appointment as IAI chairman. According to this information, the venture could constitute an important element of IAI's civilian division's business in the coming years. The volume of this business has fallen greatly in recent years.

A source involved in IAI's business told "Globes" that the venture under consideration "has been kept under the radar by IAI until recently, as should be done with business information kept under wraps by countries at a sensitive stage of negotiations." The source added that the venture was for developing a short-to-medium range executive plane, which IAI regards as an important growth engine for its civilian division.

IAI currently has business ties in executive jets with US company Gulfstream Aerospace Corporation: IAI manufactures the planes, and the US company markets them.

The particulars about the deal under consideration were brought before the committee in order to highlight the problems involved in the appointment of Shamir as chairman. Shamir is chairman and founding and managing partner of Catalyst Investments. As part of the questionnaires sent to Shamir by the committee, he cited his connection with another Chinese company, China Everbright (CEL), a limited partner in Catalyst and a partner in its management company.

CEL is a public company controlled by the Chinese government. In her decision, Gilor noted that Shamir had not brought this information to the attention of the Committee for Examining Appointments at Government Companies. Shamir later asserted that he had not known that CEL's controlling shareholder was the Chinese government, about which Gilor commented that the identity of CEL's controlling shareholder was published in sources accessible to the public. Shamir told the committee that when the Catalyst 3 fund was founded, he had given up all business activity because of the political positions he filled, and had therefore not known that CEL was controlled by the Chinese government.

"Whether or not Shamir knew about CEL's controlling shareholder, even if this company itself had no activity in Israel or connections with IAI's business, Shamir's connections with the Catalyst 3 fund mean that in his position at IAI, Shamir is obligated to avoid any dealings with any business directly or indirectly involving the Chinese government or corporations under its control," Gilor wrote.

Gilor's committee disqualified Shamir from the chairmanship of IAI at the beginning of the month, an appointment promoted by Minister of Defense and Yisrael Beitenu chairman Avigdor Liberman. Shamir formerly served as Ministry of Agriculture and Rural Development representing Yisrael Beitenu. The committee yesterday explained the circumstances that led to its decision to disqualify Shamir. Gilor cited the connection likely to prove significant between Shamir's Catalyst fund and the Chinese government, due to the involvement and investment in the fund by a Chinese group controlled by the Chinese government.

China Postal Airlines, a subsidiary of the Chinese group, is included on the list of Chinese companies having business ties with IAI. The Government Companies Authority also brought this information to the committee's attention. As indicated by the committee's decision, Shamir's relations with Chinese companies are only some of the reasons why it disqualified him. In her decision, Gilor cited other problems with Shamir's appointment which included many conflicts of interest; Shamir's failure to provide all the information requested and his explicit demand to maintain the confidentiality of the information he did disclose; his past ties with French group Dassault, and more.

Published by Globes [online], Israel Business News - www.globes-online.com - on April 20, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

View comments in rows
Update by email about comments talkback
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018