Israel eyes privatization of defense giants IAI and Rafael via public share sale

Government working on a plan to float 25-30% of arms manufacturers on the Tel Aviv Stock Exchange later this year, as demand for battle-tested systems skyrockets

Israel is preparing plans to privatize state-owned defense giants Israel Aerospace Industries (IAI) and Rafael Advanced Defense Systems in the coming months through a public offering on the Tel Aviv Stock Exchange, according to a source familiar with the matter.

The move comes amid a global arms drive and with Israel looking to capitalize on the enhanced reputations of the two firms offering battle-tested technology in the wake of Israel’s two years of war in Gaza and Lebanon and the 12-day-war with Iran.

The advancement of the long-touted privatization plans was first reported by Reuters. The approval of regulatory issues and other union-related hurdles in the coming months is expected to pave the way for initial public offerings (IPOs) by IAI and Rafael.

Israel seeks an initial sale of 25 percent to 30% of each defense contractor on the Tel Aviv Stock Exchange in small tranches, slated for later this year and in 2027, according to a senior Government Companies Authority official cited by Reuters. The government is expected to retain controlling stakes to safeguard national security interests.

Rafael and IAI did not comment when contacted by The Times of Israel.

Rafael, the developer of the first operational high-power laser interception system dubbed “Iron Beam” and the vaunted Iron Dome missile defense system, is valued at about $10 billion, according to reports in the Hebrew press. IAI, which develops and manufactures advanced missile defense systems for air, space, sea, land, cyber and homeland security, is valued at about $20 billion.

For more than a decade, the question of privatization of Israel’s defense contractors has been on the agenda, but several recent governments in recent years struggled to advance it. Back in November 2020, a ministerial privatization committee approved the sale of up to 49% of IAI’s share capital through a public offering on the Tel Aviv Stock Exchange.

The current timing for advancing a privatization via public flotation comes as Israeli defense companies benefit from tailwinds, including a surge in global military spending and large contracts in the wake of geopolitical changes and security threats around the world, starting with the Russian invasion of Ukraine and amplified by Israel’s two-year war with Hamas in Gaza.

The reality of modern warfare has been a wake-up call for many countries, including Germany, to upgrade outdated military systems, which in turn has sparked ample interest in battlefield-proven Israeli defense technologies.

Earlier this week, IAI announced it had signed a NIS 9.8 billion ($3.1 billion) contract with the Defense Ministry to expand Germany’s procurement of the Arrow 3 missile defense system, after the Israeli and German governments approved the deal last month.

The agreement is part of a larger package that, together with earlier agreements, is expected to exceed NIS 20 billion ($6.3 billion), making it the largest defense export deal in Israel’s history.

The Arrow 3 system was handed over to Germany last month in a ceremony at an airbase south of Berlin.

In 2013, Rafael, meanwhile, inked a 317 million euros (NIS 1.3 billion) deal to supply the David’s Sling air defense system to Finland.

Israeli arms sales reached a new record in 2024, for the fourth consecutive year, totaling nearly $14.8 billion, amounting to double the value of exports of five years ago, Defense Ministry figures showed. As of the end of September 2025, IAI reported a record order backlog of $26.5 billion, and Rafael has an order backlog of about $18 billion.