Government Companies Authority is considering merging radar manufacturer Elta Systems Ltd. with its parent company, Israel Aerospace Industries (IAI), as part of preparations for a planned minority share offering of the state-owned defense contractor.
The authority believes that turning Elta into an internal division of IAI would improve efficiency, streamline operations, and save tens of millions of shekels annually in headquarters costs. Officials also say the merger could strengthen IAI’s competitiveness in local and international defense tenders and increase transparency for shareholders and regulators.
Elta, based in Ashdod, employs about 4,500 people—nearly one-third of IAI’s total workforce. The company is headed by Dror Bar, with IAI Chief Executive Boaz Levy serving as chair of its board.
Government Companies Authority Director Roi Kahlon said changing Elta’s status from a subsidiary to an internal division would reduce bureaucracy, eliminating the need for a separate board of directors and independent dividend procedures.
In recent days, Kahlon asked Levy to present the IAI board’s position on the proposed move within three weeks. The board’s response is expected to outline the organizational impact of the merger on both companies. IAI has previously expressed interest in integrating Elta into its structure, similar to its existing Military Aircraft, Aviation, and Missiles and Space divisions.
Although Elta is formally a subsidiary, IAI lists it in quarterly reports as one of its four divisions. In the first half of 2025, Elta’s sales rose 23 percent compared with the same period last year, totaling about $1.5 billion. The company develops radar systems used in Rafael’s Iron Dome air-defense system and IAI’s Arrow 3 missile-defense system.
Elta Systems, a unit of IAI, develops radar and electronic defense systems used by militaries and security agencies worldwide.
Talks between the Government Companies Authority and the Defense Ministry have advanced in recent months over an initial public offering of a 30 percent stake in IAI, at an estimated valuation of around 100 billion shekels ($26 billion). The sale could generate roughly 30 billion shekels ($7.8 billion) for the state.
Although the government approved an IAI share offering in 2020, the move has not yet been implemented. Officials say the renewed push comes as IAI reports record financial results, driven by surging global demand for weapons systems. In the first half of 2025, IAI posted profits of $320 million and reported an order backlog of $25.7 billion.
The Oct. 7 war has also added urgency to the process, as Israel seeks to expand and fortify IAI’s production infrastructure to meet the military’s procurement needs and reduce dependence on imported weapons.
Despite progress toward the IPO, IAI has been operating for a year without a chairperson. Defense Minister Israel Katz and Minister for Government Companies Dudi Amsalem have agreed to appoint former Likud minister Silvan Shalom to the position and are awaiting his decision. The move comes after former ambassador and Likud minister Gilad Erdan withdrew his candidacy following Katz’s objection, reportedly due to political rivalry.
Meanwhile, defense contractor Rafael Advanced Defense Systems has also asked to go public, fearing IAI’s listing would make it more competitive by loosening government regulations. Rafael remains a wholly government-owned company, unlike its private-sector rivals IAI and Elbit Systems.
Defense industry officials said the Defense Ministry opposes Rafael’s request because of its extensive classified operations. “It looks like the state would privatize the Mossad faster than Rafael,” one industry source said.