TEL AVIV — A $98 million Pentagon award to Raytheon and its principal partner Israel Military Industries (IMI) is fortifying the position of the Israeli state-owned firm as it heads into the final phase of privatization.

Under a contract announced last week, the Ramat Hasharon, Israel-based firm is slated to receive 39 percent of the work associated with final development and production of a 120-millimeter Precision Extended Range Munition (PERM) for the US Marine Corps.

The contract, managed by the Marine Corps Systems Command in Quantico, Va., allows for five years of work for IMI, which has defined precision mortars and tank rounds as key portfolios for growing the firm once it transitions into private hands next year.

"Precision-guided munitions are IMI's core business and the company's research and development group allocates extensive resources in sustaining world class excellence and the latest technologies," Avi Felder, IMI chief executive, said Wednesday.

"Winning this contract is the result of IMI's business road map based on strategic alliances and partnerships with world-leading companies," he added.

After repeated delays, current plans call for selection of a winning bidder by mid-2016. Five groups have registered interest in bidding for IMI: Haifa, Israel-based Elbit Systems; Tel Aviv-based FIMI Fund; New York-based Renco Group; San Jose, Calif.-based Flextronics International Ltd.; and a group controlled by Israeli businessmen Sami Katzav and Meir Shamir.

In a meeting of the IMI board of directors Wednesday, Retired Maj. Gen Udi Adam, IMI chairman, reported that representatives of all five prospective bidding groups have toured IMI facilities and met with IMI executives and Ori Yogev, head of the Israeli Government Companies Authority (GCA).

In the first half of January, contenders for the firm are expected to submit their bids to the Israeli GCA, along with a 35 million shekel (US$9 million) bank guarantee.

In parallel, at the beginning of January, IMI will be split into two parts: one to be renamed Netzer Hasharon Ltd., which will continue to deal with the government on environmental and other non business-related issues and IMI Systems, the firm that will be privatized.

With the announcement of a winning bidder and the conclusion of the privatization process, IMI Systems will begin operating as a privately held firm.

The firm will be sold as a single entity apart from heavy rocket propulsion systems and other classified programs that will remain in government hands under a new company, called Tomer, to be managed by Israel's Ministry of Defense.

In an interview earlier this year, Yogev, the government official leading the privatization process, said the government retains the option to negotiate a best and final offer, should bids fall short of IMI's assessed value of some $600 million.

Under the government-approved privatization plan, IMI Systems will begin relocating from its prime real estate headquarters in the greater Tel Aviv area to Ramat Beka in the Negev desert in 2019. Final relocation to the southern desert location is expected to be complete by 2022.

"IMI is set to operate as a leading international defense company under private ownership. As a private company, IMI will have more managerial flexibility to maximize existing capabilities and fortify future competitiveness on the global market," said Adam.

Email: bopallrome@defensenews.com

About Barbara Opall-Rome

Opall-Rome is Israel bureau chief for Defense News. She has been covering U.S.-Israel strategic cooperation, Mideast security and missile defense since May 1988. She lives north of Tel Aviv. Visit her website at www.opall-rome.com.

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