Israel Aerospace Industries (IAI) is for the time being shelving its public offering. Plans for the offering started to be made two-and-a-half years ago. Underwriters were chosen, and it was believed that the state would sell to the public about a quarter of the shares in IAI for some NIS 3 billion.
IAI explained in a notification to the Tel Aviv Stock Exchange that the offering would not take place at least until December, and that it therefore wished to defer redemption of its Series D bond. There are various reasons for the postponement of the offering, but the chief one is apparently the fact that the new issues market in Tel Aviv has dried up almost completely over the past year. Besides that, the company and its workers committee are struggling to reach a pay agreement, while a cloud is hovering over the company in the shape of the intention of the Ministry of Finance Commissioner of Wages to hold a public hearing concerning alleged pay excesses.
The offering process began in November 2020, when the ministerial privatization committee approved a plan for privatizing IAI whereby the state would be able to sell up to 49% of the shares through a public offering on the stock exchange. Deputy Government Companies Authority director Ori Sheinin estimated that the offering could take place within six months, on condition that a new pay agreement was reached with the company’s employees that would settle the matter of pay excesses and that would allow performance-related compensation, but negotiation of the agreement has dragged on until this day.
Last week, Commissioner of Wages Efi Malchin wrote to IAI’s management and workers committee announcing his intention of holding a collective hearing against the workers because of allegations of excess sums paid to thousands of them. Among other things, the Ministry of Finance claims that employees were unjustifiably promoted to high ranks on the pay scale. The affair began in 2019, since when the company has been given extensions to enable it to arrive at a modern pay model, but since no progress has been made on the matter the Commissioner of Wages decided to issue his letter giving the company an opportunity to state its case before action is taken.
The prolonged failure to reach agreement on differential pay with the workers committee headed by Yair Katz meant that the company missed the opportunity to make a public offering in 2021, when the market for technology stocks was strong and a successful military technology company like IAI would probably have been hot merchandise. The difficulties with the pay issue together with regulatory problems led to deferment of the offering to 2022, and now we are in 2023 and the company is talking about 2024.
Employee bonus and dividend to state
A month ago, the IAI board approved the proposal by company chairperson Amir Peretz, CEO Boaz Levy, and wormers committee chairperson Yair Katz for a distribution of bonuses totaling NIS 61 million to the company’s employees and a NIS 379.6 million dividend to the state. Last year, IAI paid the state a dividend of NIS 655 million, the highest ever paid by a state-owned company in Israel.
IAI posted a profit of $213 million in 2022, 44% higher than in 2021, and its orders backlog rose to $15.6 billion. In the first quarter of 2023, net profit grew by 17% in comparison with the corresponding quarter of 2022 to $91 million (7.1% of sales). Export sales accounted for 72% of the total, amounting to $927 million. Exports in 2022 were 70% of sales, at $836 million.
Published by Globes, Israel business news - en.globes.co.il - on June 13, 2023.
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