JERUSALEM, — April 29, 2026 : Israel is advancing plans to sell minority stakes in its two largest state-owned defence companies, Israel Aerospace Industries and Rafael Advanced Defense Systems, as part of broader fiscal measures aimed at supporting a sharp increase in military expenditure approved for 2026.
Government officials have indicated that the initial divestments will involve the sale of 25 to 30 percent stakes in each company. The offerings are expected to be conducted in tranches during 2026, with a structure designed to limit market disruption while ensuring the state retains majority ownership. Authorities have also left open the possibility of increasing total divestments to a ceiling of 49 percent in later phases, subject to cabinet approval and market conditions.
Valuation and Listing Framework
Under the proposed framework, Israel Aerospace Industries is preparing for a public listing on the Tel Aviv Stock Exchange, with estimated valuations ranging between 80 billion and 100 billion shekels (approximately $25 billion to $34 billion). The company reported record financial performance in 2025, including revenues of $7.4 billion and net profit of $712 million, contributing to strong investor interest expectations.
In parallel, Rafael Advanced Defense Systems is expected to pursue a private placement, potentially through the TASE UP platform, which is geared toward institutional investors. Market estimates place Rafael’s valuation between 50 billion and 60 billion shekels.
The offerings will be limited to the domestic exchange, with institutional investors expected to form the primary buyer base. Preparatory work is being coordinated by the Government Companies Authority in conjunction with the Ministries of Defence, Finance and Justice.
Fiscal Context and Defence Spending
The divestment initiative is directly linked to Israel’s expanded fiscal requirements following sustained military operations. The national budget for 2026 totals approximately 850 billion shekels, with 143 billion shekels allocated to defence spending. This represents more than a twofold increase compared with pre-war levels of roughly 65 billion shekels in 2023.
Officials have stated that proceeds from the share sales are intended to generate billions of shekels for the state budget, helping offset costs associated with ongoing combat operations, force expansion, and long-term rehabilitation commitments. Defence planners have described the current period as requiring sustained procurement of interceptors, munitions and advanced combat systems over the coming decade.
Strategic and Industrial Considerations
Both companies play central roles in Israel’s defence industrial base. Israel Aerospace Industries develops a range of systems including missile defence platforms, unmanned aerial systems, satellites and cyber technologies. Rafael Advanced Defense Systems is responsible for key air defence systems such as Iron Dome and David’s Sling.
Combined order backlogs across the two firms exceeded $80 billion in 2025, reflecting increased global demand for advanced defence systems. Government officials have noted that the timing of the offerings is intended to align with this elevated demand environment.
To avoid competitive imbalances between the companies, the government is pursuing a coordinated approach in which both offerings are advanced simultaneously. Officials have expressed concern that staggered privatization could lead to workforce migration between firms, particularly among engineering personnel.
Regulatory, Security and Labor Challenges
The privatization process involves several regulatory and structural challenges. A central issue is the protection of classified technologies, particularly within Rafael Advanced Defense Systems. Authorities are preparing regulatory mechanisms, including “interest orders,” to ensure continued state oversight of sensitive operations. These measures are expected to function similarly to enhanced “golden share” arrangements, allowing the government to intervene in decisions affecting national security.
Labor considerations also remain significant. At Israel Aerospace Industries, employee representatives have linked support for the listing to revisions in existing wage regulations under Israel’s Budget Foundations Law. As a state-owned entity, the company is currently subject to public-sector salary caps, which unions argue limit its ability to compete with private-sector firms, including Elbit Systems, in attracting and retaining skilled personnel. Proposals under discussion include adjustments that would enable more flexible compensation structures and the introduction of equity-based incentives.
Timeline and Next Steps
The government expects the sales process to take up to a year, reflecting the complexity of regulatory approvals, labor negotiations and security arrangements. Initial tranches are scheduled for 2026, with additional offerings potentially extending into 2027 depending on market conditions and policy decisions.
Final approval of the transaction structures remains subject to cabinet authorization. The Ministry of Defence has provided preliminary backing for the initiative following extended internal deliberations on balancing national security considerations with fiscal requirements.
The planned divestments form part of a broader strategy to address increased defence spending while maintaining state control over critical military-industrial assets.
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