Israel moves to float $20 billion Arrow maker IAI and $10 billion Iron Dome developer Rafael
Wartime demand and strong valuations revive long-stalled privatization plans. “We have an opportunity now … because of the high value of both companies,” director of the Government Companies Authority, Roi Kahlon, told Reuters.
After more than two decades of debate and false starts, Israel is preparing to begin the privatization of two of its largest and most strategically sensitive defense companies, buoyed by strong wartime financial performance and rising global demand for advanced air-defense systems.
Israel plans to launch initial public offerings of Israel Aerospace Industries (IAI) and Rafael Advanced Defense Systems as early as the second quarter of this year, according to a senior government official, in what would mark one of the most consequential shifts in the structure of the country’s defense industry in a generation. The new timeline was first reported by Reuters.
Roi Kahlon, director of the Government Companies Authority, told Reuters that labor and regulatory hurdles are expected to be resolved in the coming months, clearing the way for IPOs of both companies. Defence privatization has been discussed intermittently for roughly 20 years, but momentum has strengthened following robust financial results driven in part by Israel’s two-year war with Hamas in Gaza.
Under the current plan, the government would initially sell between 25% and 30% of each company on the Tel Aviv Stock Exchange, in a series of small tranches spread across this year and next. The state would retain control for the foreseeable future. “If you want to maximize valuation of the sale, we must make it in steps,” Kahlon told Reuters, adding that the approach is supported by both the companies themselves and the Defense Ministry.
The valuations involved are substantial. IAI, a major producer of missile defence systems and unmanned aerial platforms, is valued at roughly $20 billion, according to Reuters. Rafael, best known for developing the Iron Dome missile defence system and the newer Iron Beam laser-based interceptor, is valued at around $10 billion.
“We have an opportunity now … because of the high value of both companies,” Kahlon said.
For Rafael, the Reuters report marks a significant acceleration from cautious internal discussions that until recently remained largely behind closed doors. As reported last month by Calcalist, the Government Companies Authority was expected to hold talks with Rafael chairman Yuval Steinitz and CEO Yoav Turgeman over preparations for a possible IPO. Those discussions followed pressure from Steinitz, who warned that remaining fully state-owned while competitors moved ahead could weaken Rafael’s competitive position.
Rafael is wholly owned by the state and develops and manufactures some of Israel’s most advanced air-defence systems, including Iron Dome, David’s Sling and Iron Beam. Iron Beam, a high-power laser system, was delivered to the Israel Defense Forces at the end of 2025. Unlike IAI, which already has bonds traded on the Tel Aviv Stock Exchange and publishes financial statements, Rafael has never undergone a full public-market disclosure process.
That distinction has long complicated privatisation efforts. A significant portion of Rafael’s activities remains classified, making the preparation of a prospectus and formal valuation unusually complex. Until now, Rafael has been unable to conduct a full valuation because of those secrecy constraints. Steinitz has argued in internal discussions that mechanisms can be established to protect classified operations while still allowing the company to go public.
According to the earlier reporting, a recent request by Kahlon for preliminary IPO preparations suggested that initial conclusions could soon be presented to professional bodies in the relevant ministries and to the Ministerial Committee for Privatization Affairs. Reuters’ report now suggests those internal deliberations have translated into a concrete timetable.
IAI’s path to the market appears more advanced. In November, Accountant General Yali Rothenberg said plans to privatize IAI were taking shape after a ministerial panel approved a framework to sell up to 49% of the company through an IPO. IAI CEO Boaz Levy told Reuters that an IPO is essential to the company’s long-term growth. “We should look toward the future,” he said. “It’s very important for the company because (IAI) needs to grow.”
Beyond valuations, government officials argue that partial privatisation would reduce bureaucratic constraints that can slow decision-making in state-owned firms. Kahlon pointed to the case of Israel Military Industries, which was sold to Elbit Systems in 2018 and, he said, is now valued at roughly four times its original purchase price.
Still, the move carries political, strategic and regulatory sensitivities. Both IAI and Rafael sit at the core of Israel’s defense ecosystem, supplying systems that are central not only to export growth but also to national security. Selling even minority stakes will require balancing market transparency with military secrecy, and investor appetite with geopolitical risk.
If the offerings proceed as planned, they would mark the most significant opening of Israel’s defense sector to public investors since Elbit Systems became the dominant privately controlled player in the industry, reshaping a landscape long dominated by the state.
