Rafael Reviews Companies involved in Simulation & Space

Israel Defense has learned that Rafael is making inquiries with Israeli companies in the fields of ground simulation and a Spanish company in the space category

Rafael Reviews Companies involved in Simulation & Space

Yoav Har-Even, Rafael's CEO

Apparently, Yoav Har-Even, Rafael's CEO, presses on with the effort to expand and diversify the Company's business activities, with the intention of reducing their reliance on the air-defense and missile fields. Having acquired the Aeronautics Company and having won the UAV tender of the Israeli Ministry of Defense (IMOD), Rafael is currently making inquiries in the fields of ground simulation and space, as sources have reported to Israel Defense.

Har-Even's strategy appears to be based on the realization that Rafael is currently in a favorable financial position, owing to the success of their Iron Dome system and the frequent acquisition of interceptors for that system by IMOD, and that these profits should be utilized to diversify the Company's revenue sources. Instead of relying on just two primary sources – missile (air and ground) systems and air-defense systems, Rafael is entering such new fields of activity as UAS (pursuant to the acquisition of Aeronautics). It should be noted that by law, Rafael is obliged to pay one half of its profits as dividend to the State of Israel. Each year, negotiations are conducted with the Israeli Corporations Authority regarding the amount payable vis-à-vis the scope of investment in the Company's future development.

Trade circles have been openly critical of the price Rafael paid for Aeronautics and the low bid they presented in order to win IMOD's UAV tender. IAI bowed out in advance, owing to the financial terms, and while that failed to turn on a red light – Elbit Systems also failed to fight tooth and nail for the tender. IAI and Elbit Systems have been two of Israel's leading UAV manufacturers for decades. The criticism notwithstanding, Har-Even appears to be determined to diversify the Company's revenue sources at any cost. He appears to know something about Rafael's future financial stability – something others cannot currently see.

Future Expansion

As far as the ground simulation field is concerned, Israel Defense has learned that Rafael is making inquiries with several companies in this field, including the Bagira Company, which develops simulators for the ground forces of IDF as well as for overseas clients. Officially, however, the parties have denied that any negotiations are under way. At the same time, Rafael has been reviewing other companies in this category. In the space context, Rafael has been making inquiries with a Spanish company. Regarding that company, Israel Defense has learned that the inquiries have reached a relatively advanced stage.

It should be noted that Rafael is no stranger to the space category, as they have been selling satellite engines to Israeli and overseas clients for decades. However, Rafael has recently won a precedential tender to build two small satellites for IMOD, after many years during which the Ministry assigned the satellite activity to IAI exclusively. Additionally, Rafael has recently offered a constellation of satellites to Brazil, but this offer has not yet matured into an actual deal.

Apparently, the years 2019-2020 are expected to be a milestone in the history of the Rafael Company – one way or another. The results of the business decisions currently being made by the Company's leadership will only be measurable – through the Company's profit line – in a few years' time. The business results of Rafael – a government-owned company – are reported to the public by the Israel Corporations Authority, with a degree of transparency that is lower than the one used for companies traded on the stock exchange. Consequently, it is doubtful whether Rafael will report to the public the return on their investment in Aeronautics, the UAV tender or future acquisitions in other fields of activity.

The Israel Corporations Authority, as the organ supervising Rafael's financial conduct, refuses to engage in a professional dialog around those decisions. Consequently, the decision-making process regarding the investments made by this government-owned company remains invisible to the Israeli public – which happens to be Rafael's primary shareholder.



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