State-owned Tomer, which manufactures, among other products, the engines for Israel’s Arrow air defense missiles, is preparing for its first debt offering to institutional investors to finance an expansion of its production capacity.
Calcalist has learned that the company plans to raise at least 300 million shekels (over $94 million), while the maximum issuance framework approved by the Government Companies Authority stands at 500 million shekels ($164 million).
The fundraising is planned for completion by the end of the year through bonds traded on the institutional investors platform, similar to Rafael. As a result, Tomer will not become a public company and will not be required to comply with the disclosure rules that apply to listed companies, particularly significant given that most of its activity is considered classified.
Launch of Israel Aerospace Industries' Arrow 3
(Photo: Israel Aerospace Industries)
Tomer’s plan to raise capital through bonds began taking shape at the start of the year as part of joint staff work by company executives and the Government Companies Authority. Authority director Roi Kahlon disclosed the plan about two months ago at a conference at the Tel Aviv Stock Exchange, saying the company’s financial figures indicated that it was mature enough to become a public company.
Senior officials at the Finance and Defense ministries, however, were less enthusiastic about the move. They pointed to the circumstances that led to Tomer’s establishment.
Tomer was founded about a decade ago as part of the privatization of Israel Military Industries and its sale to Elbit Systems. The rocket propulsion and missile-engine manufacturing operations, considered a unique national center of expertise, were excluded from the privatization.
The Government Companies Authority views the proposed structure — issuing bonds solely to institutional investors without turning Tomer into a public company — as a compromise that balances the state’s security interest in preserving the secrecy of its operations with the company’s need for capital to support growth.
The company is a major subcontractor for Israel Aerospace Industries and Elbit Systems, manufacturing engines for Arrow 3 and Arrow 4 missiles, Shavit launch vehicles used to send Ofek satellites into orbit, Barak MX missiles, the RAMPAGE air-to-surface missile and artillery rockets launched from the PULS system.
Growing demand for missile systems amid an arms buildup in Israel and around the world has led Tomer to expand its production lines and increase its workforce to about 1,000 employees.
The expansion also comes against the backdrop of the IDF’s procurement of Arrow missiles and their sale to Germany in two deals worth a combined total of about $7 billion.
Tomer’s sales have totaled about 850 million shekels (about $279 million) since the beginning of the year, roughly 150 million shekels ($49million) above target. By 2030, the company plans to increase sales to about 1.8 billion shekels ($591 million)and expand its workforce to 1,400 employees.
Government Companies Authority deputy director Maayan Harel has set Tomer chairman Roni Moreno, CEO Dotan Gabay and other senior company officials a target of completing a fundraising of at least 300 million shekels (over $94 million) by the end of the year. Meeting the target would allow executive bonuses to be increased by up to 20%.