Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) has reason to be concerned about a merger of Israel Military Industries Ltd. (IMI) and Rafael Advanced Defense Systems Ltd., mainly because of its effect on IAI's missile development plans.
IAI currently manufactures the Arrow anti-ballistic missile system, whose Arrow 3 version is being rapidly developed. For years, IAI has also manufactured various versions of the Barak surface-to-air missile to protect strategic sites and ships. For years, IAI concentrated on the hardware engineering of these missiles, while IMI built the missiles' motors at its Givon factory.
IAI's Missile and Space Division is concerned that Rafael, as IMI's new owner, will raise the price for the motors for a range of missiles, which could intensify the already tense relations between the two government-owned defense companies.
IAI is also worried about greater competition from Rafael, especially after it demonstrated strong missile development and manufacturing capability, including missile systems to defend against short-range and medium-range rockets, such as Iron Dome and Magic Wand.
The longstanding close IAI-IMI relationship over missile motor manufacturing was one of IAI's arguments in recent weeks for taking over IMI. If IMI is ultimately merged with Rafael, IAI will have to work out a reasonable arrangement to ensure continued manufacturing of motors for its missiles.
Published by Globes [online], Israel business news - www.globes-online.com - on January 17, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011