Iron Dome and Iron Beam developer Rafael targets fast-track IPO at over $20 billion valuation
Private placement plan would sell up to 49% to select investors, bypassing parts of standard disclosure rules.
The Government Companies Authority is accelerating efforts to advance an initial public offering (IPO) of Rafael Advanced Defense Systems. Calcalist has learned that the authority recently submitted a draft proposal to the Ministry of Defense for approval, ahead of bringing it to the Ministerial Committee on Privatization.
According to the proposal, Rafael would be partially privatized through a fast-track, non-transparent process involving a private offering. Shares would be sold to selected investors rather than the general public. This abbreviated procedure would bypass some regulatory requirements and could allow Rafael to avoid fully disclosing its financial reports.
Even now, although Rafael publishes quarterly financial results, parts of those reports are redacted. This contrasts with Israel Aerospace Industries, which, as a bond-traded company, publishes full financial disclosures.
Limited transparency has drawn criticism in the past. Concealment of transaction details led to a critical audit by the Government Companies Authority into Rafael’s acquisition of Aeronautics, a deal carried out with business partner Avichai Stolero that exposed deficiencies in corporate governance and decision-making processes.
Rafael and Israel Aerospace Industries are both fully state-owned. Under the proposal, up to 49% of Rafael’s shares would be sold at a valuation of NIS 60-70 billion ($20-23 billion). The offering would target institutional investors, funds and private investors, and would be carried out in several tranches.
If approved, the plan could shorten the IPO timeline and allow it to proceed in parallel with the planned public offering of Israel Aerospace Industries. Unlike Rafael, IAI is considered more prepared for listing: it already has exposure to capital markets, publishes accessible financial statements, and received approval in 2020 to sell a minority stake.
Two weeks ago, Calcalist reported that the Defense Ministry had lifted its long-standing opposition to IPOs of defense companies, subject to conditions. These include conducting the offerings in Israel and limiting the share sale in each company to no more than 30%. Another requirement is that Rafael and IAI be listed simultaneously to prevent regulatory imbalances that could distort competition.
A private placement by Rafael would effectively bypass requirements set by the Israel Securities Authority, which could otherwise delay a public offering. However, such a structure would limit the number of participating investors.
According to a source familiar with the matter, “Rafael and the Companies Authority believe this outline is the most suitable under current conditions, as the state and the company are seeking to maximize returns quickly, against the backdrop of Rafael’s strongest financial position to date.”
Rafael is expected to publish its 2025 financial results on Thursday, with projections pointing to record sales, order backlog and net profit. The company reported 14.5% sales growth in the third quarter of 2025, reaching approximately NIS 5.2 billion, with an order backlog exceeding NIS 72 billion.
IAI recently reported annual revenue of $7.4 billion for 2025 and an order backlog surpassing $30 billion for the first time.
The two companies are central to Israel’s defense industry. IAI produces systems such as Arrow 3 and Barak MX, while Rafael develops Iron Dome, David’s Sling and the Iron Beam laser system, which was delivered to the Israel Defense Forces but is not yet operational.
Demand for their products has surged, driven by accelerated procurement by the Israel Defense Forces following the October 7 war, as well as rising global demand, particularly in Europe, amid the ongoing war between Russia and Ukraine.
Beyond generating immediate revenue for the state and helping reduce Israel’s debt-to-GDP ratio, an IPO could strengthen the companies’ competitiveness, enable capital raising, and improve their ability to compete in international tenders. It could also allow more flexible employee compensation structures.
In addition, listing the companies could restore their eligibility under the Law for the Encouragement of Capital Investments, from which government-owned companies were excluded in a reform about 15 years ago. The law provides tax benefits to exporters.
The Government Companies Authority estimates that IAI could be valued at NIS 80-100 billion ($25-32 billion). Rafael’s valuation will be determined following Passover, subject to agreements with the Defense Ministry.
However, there is a key point of contention. While Defense Ministry Director-General Amir Baram has stated that no more than 30% of shares should be sold, the Companies Authority is proposing a sale of up to 49% of Rafael. The issue will be reviewed by relevant authorities, including the Director of Security of the Defense Establishment.
Labor representatives have also raised objections. Yair Katz, chairman of IAI’s workers’ union, and Victor Hasson, chairman of the engineers and technicians workers’ union at Rafael, said they would support the IPO only if wage restrictions imposed by the Treasury are lifted.
“There will be no issuance without agreements with the workers,” Katz said.
The Defense Ministry said in a statement: “The ministry supports the issuance of defense companies, subject to safeguarding security interests. These processes should be discussed in closed forums while examining all implications, and not through media leaks.”
