Elul Group News Analysis - March 2012

General News Summary

Gaza Flare up Ends – Or Does It?

Palestinian rocket fire resumed less than a day after an Egyptian-mediated cessation of hostilities along the Gaza Strip border. Four days of fighting had ended on March 13 with little expectation of avoiding a further round or rounds in the future.

Mediators representing Egypt's new regime succeeded in getting both Israel on one side and Palestinian terror factions, headed by Islamic Jihad, to stop exchanges of fire on March13. In the preceding days, more than 300 Grad and Qassam rockets were fired into populated civilian areas of Israel, causing damage but no loss of life, while Israel's new Iron Dome anti-missile batteries succeeded in intercepting and shooting down 56 of them. Iron Dome only fires selectively, at incoming munitions destined to hit populated areas. Israel reported a 70% success rate for the system developed by Rafael Advanced Defense Systems. Israel says that 26 Palestinians were killed in Israeli strikes, of whom 22 were officially known terrorists.

Gaza's Hamas government remained on the sidelines during the confrontation. The Islamic Jihad, Hamas opposition in Gaza, claimed success in standing up against superior Israeli firepower and what it called an Israeli provocation – a successful air attack against a local terrorist committees unit which planned to launch a major terror attack on southern Israel from Sinai.

Egypt said on March 13 that its efforts to halt military activity against Gaza were aimed to stop the shedding of Palestinian blood, and that it would monitor implementation of the informal agreement. A Palestinian Islamic Jihad (Islamic Holy war) spokesman said that the agreement, which was not in writing, included an end to targeted killing, described by the Islamist terror group as “assassinations”.

The scale of confrontation poses a tactical question for Israel, which should consider that the effect of target killings, even if they stop an apparent terror attack before it is launched, may paralyze the southern part of the country where 1 million people live.  The clear Israeli answer is – it will continue. No immunity to terrorist attacks.

Iranian Indecision – Or Decision

Shortly after his return from what has been described as a perhaps surprisingly successful White House visit, Prime Minister Benjamin Netanyahu said that an attack on Iranian nuclear facilities could take place within months. “We're not standing with a stopwatch in hand," the prime minister told a series of TV interviewers at the end of the first week in March. “It's not a matter of days or weeks, but also not of years. The result must be removal of the threat of nuclear weapons in Iran's hands, to be targeted on Israel as its leadership maintains.”

Netanyahu's statement came on the heels of meetings with President Barack Obama, in which he was thought to have been trying to convince the U.S. to endorse the attack on Iran that the Government is thought to favor. Netanyahu told Obama that he had not yet made any decision about whether to attack Iran's nuclear facilities, though he made it clear he did not rule out such a move in the future. In statements to the press both before and after the meeting, Netanyahu said Israel has the sovereign right to defend itself against Iran.

For their part Obama and his Secretary of Defense Leon Pannetta, who again and again expressed their country's unequivocal support for Israel's security, said that while the U.S. was not bluffing when it said it might use military force if Iran does not roll back its nuclear arms program, the Americans stressed that they did not deem an attack justified unless Iran is actually building a nuclear weapon. Israel, on the other hand, maintains such an attack is justified if Iran has the immediate capability of building a bomb, or if Teheran moves more of its allegedly peaceful nuclear enrichment facilities underground so as to make them less vulnerable to an attack.

About a week after meeting Netanyahu, Obama seemed to make his stance just a little tougher. Speaking at a press conference with British Prime Minister David Cameron, he insisted that while there was still “time and space” for a diplomatic solution, “the window for diplomacy is shrinking.”

Some analysts point out that though their public positions differ, there is no guarantee that Obama and Netanyahu did not reach some kind of agreement on whether (or not) to attack, or on the red lines whose crossing by Iran might trigger such an attack. A number of questions might have affected such a joint decision, including the following:

Do Israel, the United States or both countries have the capability of destroying enough of the Iranian nuclear program, many of whose sites are deep in mountains or protected by heavy concrete bunkers, to significantly damage the Iranian nuclear capability?

What effect would anticipated retaliation on Israel (to an attack by either the U.S. or Israel) by Iran and its Hizballah and Hamas allies have on Israeli society and the economy?

Can an attack, if it is deemed necessary, be delayed till after the U.S. presidential elections in November, since the last thing Obama wants is to involve his country in a Middle Eastern war before the votes are counted?

Is there any real possibility that new sanctions against Iran, due to be applied in June, will be effective?

And then there's the questions of whether public statements by both the Obama and Netanyahu administrations reflect their real positions or are disinformation. Both leaders might have made the same statements no matter what they had decided, some cynics suggest.

Delhi Attackers ID'd

Police in New Delhi and Indian intelligence agencies announced that they have identified three Iranians responsible for plotting and carrying a mid-February attack on an Israeli diplomatic car in the Indian capital in which a diplomat's wife was wounded, The Times of India reported on March 15 and an Indian national has also been accused of conducting surveillance on the attack in which Mrs. Tali Yehoshua Koren was hurt, but police say it was an Iranian who rented a motorcycle and followed the car, tacked a magnetic bomb on the vehicle, and sped off while the car exploded behind him.

Journey Nixed

Knesset Speaker Reuven Rivlin has blocked the planned trip of three female Knesset members to a women's conference in the U.S. in response to the American denial of an entry visa to a male MK because of what it deems his membership in a terror organization.

MKs Zahava Gal-On (Meretz), Tzipi Hotovely (Likud) and Einat Wilf (Atzmaut) were scheduled to take part in a four-day conference on women that begins March 25 and will be hosted by the U.S. Congress.

Rivlin called “unacceptable” the U.S. ban on National Union MK Michael Ben Ari, a follower of the late Rabbi Meir Kahane and member of his Kach organization, termed “terrorist” by the American government.

Cyprus Ties Boosted

Israel and Cyprus upgraded their relations during a mid-February visit to the island by Prime Minister Benjamin Netanyahu, and signed an agreement that will allow IDF planes and ships to use Cypriot airspace and territorial waters. Cypriot President Christofias called on the EU to send a sharply worded message to Turkey in response to its threats to use all means if Cyprus distributed offshore oil and gas exploration licenses in its exclusive economic zone.

Forgery Case Closed

A Jerusalem District Court has acquitted antiquities dealer Oded Golan and four others of selling forged antiquities. The items included a tablet inscribed with Biblical-style Hebrew instructions on caring for the Jewish Temple, and an ossuary, or ancient burial box bearing the inscription, "James, brother of Jesus."

The Economy

Netanyahu's Goal

Prime Minister Benjamin Netanyahu's ambition is to see Israel's economy overtake France and the U.K. in per capita income. "There's no reason why we can't eventually surpass Britain and France in GDP per capita. We have to keep growing at 5%,” he told Bloomberg.

The business news service observed that Netanyahu's policies since he was Ariel Sharon's finance minister almost a decade ago have stimulated Israel's economy, which grew at an annual average of 4.2%. "As part of his plan to spur growth," Bloomberg reported, “Netanyahu has set up a committee to boost competition, introduced reforms to lower the cost of living after social protests, passed a law to free up public land for private development, maintained fiscal discipline, and introduced a two-year budget, a move praised by the IMF.”

GDP Figures Revised

Israel's 2011 gross domestic product rose by 4.7% and not 4.8% as it was originally reported, the Central Bureau of Statistics said in early March. The Israeli economy had grown by 4.8% in 2010 and by 0.8% in 2009. The CBS said that per capita, GDP rose by 2.8% in fixed prices in 2011 after a rise of 2.9% in 2010 and a fall of 0.9% in 2009.

Even after the slight downgrade, the daily Ma'ariv noted that Israel's growth for 2011 far exceeds the average for other developed countries in the OECD, the Organization for Economic Cooperation and Development, which was only 1.9%.

Elbit Backs Out

Elbit Systems, best known as a defense contractor, has backed out of the bidding for an Israel Electric Corp. fiber optics telecommunications infrastructure project in protest over lack of clarity of the terms of the call for bids. A second potential bidder, the consortium led by businessman Ram Belnikov, also said that without major changes in the tender, it would also withdraw.

Deficit Rising

Despite a NIS 1B (about $270M) rise in tax revenues from NIS 17 to NIS 18B, February's government deficit was higher than the corresponding month of 2011, the Finance Ministry said. Government spending was NIS 21.7B in February, 6.6% more than February 2011. Although the budget deficit was set at 2% of GDP for 2012 in the biennial budget, the ministry is already contemplating a budget overrun of NIS 18B, boosting the deficit to 3.5% of GDP.

Trade Gap Balloons

Israel's trade deficit rose to NIS 4.6B ($1.25B) in the first two months of 3012, 77% more than January-February 2011. At the current rate, the annual gap will double last year's. The ratio of exports to imports fell to 59% in February, down from 74% in 2011 and 83% in 2010, as February's high-tech exports, the main source of GDP growth, dropped to NIS .5.9B (about $1.58B), down 17% from the parallel month in 2001.

Tourism Record

232,000 foreign tourists visited Israel in February, a 6% increase over February 2011 and up 4% from February 2010, the previous record for the month. The number of people who entered overland on one-day visits from Egypt at the Taba crossing point near Eilat was up 55% to 8,100 visitors, five times the number for February 2011, during the height of the Egyptian unrest.

Recycling Rises

Six hundred million bottles were recycled in 2011, 77% of bottles with deposits that were sold last year and exceeding the 73% target set in the Bottle and Can Deposit Law (5759-1999). 41% of family-sized beverage bottles, on which there is no deposit, were recycled in 2011, exceeding the 35% target.

Asian Exports Exceed U.S.

Israel's exports to Asia between October 2011 and January 2012 overtook exports to the U.S., according to the Israel Export Institute: during the period, 21% of goods exported (worth $3.1B) went to Asia, compared to the U.S. 20% ($2.9B). Europe remains the largest market for Israeli exports (35%, or $5.2B).

Big Price Rises

Prices of food, beverages, cosmetics and home cleaning supplies rose by an average of 18% in Israel between January 2010 and September 2011, according to a global Nielsen study. Over the same time period, U.S. prices fell by 5.2%.

Finance & Investment

Blackstone on the Way

The Blackstone Fund, the world's largest private equity fund, will establish an Israeli presence in 2012. Blackstone has been negotiating with Markstone's managing directors over the establishment of a fund that would invest in Israel under Markstone's management. The new fund envisions raising large-scale investments in it, in the $100 million-$1 billion range.

Lenovo Investment

Lenovo, the Chinese computer manufacturer, will invest tens of millions of dollars in Israel's Vertex venture capital fund, according to a report in Globes. Vertex, which has about $600 million under its management, plans to invest the funds in Israeli companies in the cellular, telecommunications, infrastructure and environmental fields.

Migdal Purchase

Israeli businessman Shlomo Eliahu, the owner of Eliahu Insurance Ltd. who started his business career as a messenger for the Migdal insurance company, has come full circle. He is buying the 69.13% stake of Italy's Assicurazioni Generali SpA in the Migdal for NIS 4.2B, reflecting a company value of NIS 6B, a 13% premium on its market cap of NIS 5.4B. Migdal is one of Israel's leading financial groups and the country's largest life insurance company.

Mergers & Acquisitions

Coviden-superDimension

superDimension, a medical diagnostics developer founded in Israel 17-years ago and currently based in Minneapolis and facilities in Herzliya, is being acquired by Coviden plc, a spin-off of Tyco International. According to Calcalist, the economic supplement of Yediot Aharonot, purchase price is $350M.

superDimesion's Electromagnetic Navigation Bronchoscopy is mostly used to diagnose lung cancer. The technology of the company, founded in 1995 on the basis of navigation technology for aircraft, has been adapted to navigation inside the body, particularly for previously impossible endoscopy in the bronchial tubes. The company adapted it for navigation within the body, developing an endoscope for the bronchial tubes, for which there is no other available solution. It includes a sensor fitted to a catheter and magnets placed on the patient's chest to enable navigation inside the body. The sensor can be sent to precise locations, take a biopsy and mark the spot for subsequent precision radiation treatments.

Singtel-Amobee

Singapore Telecommunications Limited is acquiring Amobee, a mobile advertising firm headquartered in California with an R&D center in Herzliya. Purchase price is about $350M for Amobee, which was founded in 2005 and has 127 staff in eight offices in Israel, the U.S., Europe, Asia and Latin America, provides end-to-end mobile advertising solutions and services for advertisers, publishers and operators.

SingTel is one of the largest mobile carriers in southeast Asia, with 434 million mobile customers in 25 countries and regions, including Bangladesh, India, Indonesia, Pakistan, the Philippines and Thailand.

ATX-Arcos

ATX Networks has acquired Arcos Technologies of Petah Tikva, a maker of home video network solutions, for $26M. Sellers include Israel's Xennia Venture Capital (35%), and C. Mer Industries, whose Royal Networks subsidiary owned 24% of the Petah Tikva firm.

Conduit Talks Falter

Talks for the sale of part of Israel's Conduit Ltd., a developer of closer links between Internet users and content developers, fell through in late February, according to a report in Globes. The mooted deal for 9% of Conduit involved potential Israeli sellers Yozma Venture Capital and Ofer Hi-Tech and private equity firm Silver Lake were said to be based on a company value of $2-$2.5B, which would have made Conduit one of Israel's most valuable technology companies. Silver Lake is a global private investment firm with approximately $14B in assets under management and with offices in Menlo Park, New York, London, San Francisco, Hong Kong and Tokyo.

Radvision Deal Close

Avaya plc was on the verge of acquiring Radvision, an Israeli developer of video-conferencing solutions controlled by brothers Zohar and Yehuda Zisapel, for $230-240M. According to Globes, Radvision was on the market for over two years, since its largest customer, Cisco Systems, acquired Tandberg of Norway, the Israeli company's rival, for $3.3B.

Science & High Technology

Biological Computer

Scientists from the Haifa-based Technion-Israel Institute of Technology and California's Scripps Research Institute have developed a biological computer composition. The device can accept as many as 1 billion programs.

A computer, according to Technion Prof. Ehud Keinan, is a  machine made of four components: hardware, software, input and output, adding that all current computers are electronic machines comprising a complex composition of metallic and plastic components, wires, transistors, etc., and that the software is a sequence of instructions given to the machine in the form of electronic signals. “In contrast to electronic computers, there are computing machines in which all four components are nothing but molecules,” says Keinan. “For example, all biological systems, and even entire living organisms, are such computers. Every one of us is a bio-molecular computer, that is, a machine in which all four components are molecules “talking” to one another in a logical manner.”

IBM Targets?

No less than seven Israeli public companies are on a short list of 21 possible targets of IBM's multi-billion-dollar acquisition targets published by the Morgan Stanley investment bank, according to a report in Globes.  The firms, all leaders in their fields, are Check Point, Click Software, NICE Systems, Verint Systems, Radware, Comverse and Amdocs.

India Agreement

Israel and India have signed an agreement for joint research and development of water treatment technologies, focusing on resource management, sewage and drainage. The deal was signed in February, during Indian Minister for Urban Development Kamal Nath's visit to Israel.

Environmental Leadership

Israel ranked second in a world listing of cleantech innovation in “Coming Clean,” a 2012 report published by the San Francisco-based Cleantech Group. Israel was ranked behind Denmark and ahead of Sweden in the ranking, in which the three small world leaders were far ahead of such larger countries as the U.S., Germany and France.

Intucell to Aid AT&T

Intucell, a specialist in network optimization solutions for mobile operators based in Ra'anana, northeast of Tel Aviv, has agreed to provide AT&T with management of the telecommunications giant's U.S. mobile network. Intucell radio management solution enables mobile operators to better utilize radio access networks and handle more traffic with the introduction of smartphones. Value of the deal is $55M.

Knowledge Exports

Israel annually exports about $9.5 billion worth of knowledge-based products and services, according to a report in Globes.

Nano-Satellites

Researchers at the Technion Israel Institute of Technology – for years experts in the miniaturization of satellites – plan to build and dispatch into space a fixed formation of three nano-satellites weighing up to six kilograms each, the first time scientists will attempt this feat. The Technion has been successful in building satellites that are smaller than a refrigerator and thus more efficient and cheaper than devices built in the U.S. and Europe.

The communications satellite construction will be launched in 2015.

Night Vision for Drivers

BrightWay Vision, a start-up spun out of defense contractor Elbit Systems, has developed a night-vision system for civilian vehicles. BrightWay's device, called BrightEye, improves night vision at a range of up to 250 meters and is designed to identify obstacles on the road, including other vehicles, pedestrians, and animals, and alert the driver. It has three main components, laser beams; a camera installed on the vehicle's grille; and a screen on the dashboard, which displays an enhanced picture of the road ahead. BrightEye is based on military night-vision systems developed by Elbit.

iPad3's Israeli Accent

Apple was expected to incorporate technology from Anobit, its recently acquired first Israeli subsidiary, in the iPad3 tablet computer released in early March. Anobit's flash memory technology was used in the iPad2. Last month, Apple admitted that it had indeed acquired the start-up, its first Israeli acquisition.

Anobit's chip is responsible for making gadgets faster; it enhances flash drive performance through signal processing. It has been used in products including the iPhone and the MacBook Air. The iPad3 can be expected to be even faster than its predecessor.

Riding the Waves

Tel Aviv-based SDE Energy, a developer of electricity generating systems, has selected by a team of international scientists as number one in the world in Sea Wave Energy Technologies, number six in Tidal Energy and River Energy, and was ranked as one of the Top 100 Clean Energy Technologies.

Aerospace & Defense

More Iron Domes

Defense Minister Ehud Barak says he will seek to have the further development of missile interceptor systems declared a national emergency project, following the success of the Iron Dome in intercepting rockets and missiles fired against Israeli cities from Gaza. Iron Dome intercepted 56 incoming short-range rockets and missiles in two days, an unprecedented success, following an upgrade to the system in recent weeks by the Israel Air Force and the manufacturer, Rafael Advanced Defense Systems.

Three Iron Dome batteries were deployed to protect Ashkelon, Ashdod, and Beersheba, with a fourth due for delivery by the end of March. Barak said that development of other interceptor systems, including the Magic Wand, which is designed to intercept intermediate range missiles, should be accelerated. “Iron Dome's great success in intercepting rockets fired against Israeli cities contributes to the security of Israel's people, and gives defense the freedom of decision,” he said at a Ministry of Defense meeting.

The Iron Dome's success comes a few weeks after the Ministry of Defense threatened to suspend procurement of the system, due to budget cuts. Ministry officials said that the high cost of Iron Dome batteries meant that it could not afford to buy enough interceptor missiles. It estimates the cost of each battery at $50M and the cost of each Tamir missile at $70,000-100,000M.

Under the Ministry of Defense plan, the Air Force is due to have six Iron Dome batteries deployed in 2013, assisted by U.S. aid funding for the program. According to Defense Ministry estimates, 13 batteries are needed to provide reasonable nationwide defense. That includes protection of southern Israel, on and near the Lebanon border in the north, population centers in the center of the country and key strategic infrastructure and defense installations.

Budget Battle

Israel's defense establishment is fighting hard against budget cuts proposed by the Finance Ministry, saying that many key programs, including the Arrow and Iron Dome anti-missile defense systems, may suffer. Also under threat are production of additional Merkava battle tanks, training programs for ground forces, advanced officer training and development of specialized IDF “action units” for special missions.

$1.6 Billion Azeri Deal

Israel, through government-owned Israel Aerospace Industries, will sell unmanned aerial vehicles and aerial defense systems to Azerbaijan in a $1.6B deal announced in late February. The deal reflects Israel's growing security relationship with the Muslim Central Asian former Soviet republic and came a few weeks after Azeri forces reportedly thwarted an Iranian-backed plan to attack Jewish and Israeli targets in Baku, the Azeri capital. Israel's ties with Azerbaijan have grown as its once-strong strategic relationship with another Iranian neighbor, Turkey, has deteriorated.

On March 14, Azeri security forces announced that they had arrested 22 suspects involved in an alleged Iranian Revolutionary Guards-backed plot to attack the Israeli and U.S. embassies in Baku.

IAI's Asian Contracts

Israel Aerospace Industries' Elta subsidiary recently signed deals worth $71M to provide military electronics to two unnamed Asian countries. One deal, for $35M, is for wide-range ELM-2022A airborne radar systems, the other a $36M contract for electronic warfare pods to be installed on combat aircraft.

Italian Trainer Contract

Israel has agreed to purchase 30 Alenia Aermacchi M-346 trainer aircraft from Italy. The Italian planes will replace U.S.-made Skyhawks, which have been in the Israel Air Force services for six decades. South Korea, whose Korean Aerospace Industries T-50 Golden Eagle was passed over in favor of the M-346, said the choice was determined for political reasons, rather than on the merits of the aircraft themselves. The Italian planes – part of a deal in which Italy has agreed to purchase two intelligence-gathering aircraft for $700M and spend $300 in reciprocal purchases – are due to be absorbed by Israel in 2014-15.

New Spike Unveiled

Government-owned Rafael Advanced Defense Technologies unveiled a new version of its Spike missile series at February's Singapore Air Show. Spike SR, a multi-mission short-range missile, is in advanced stages of development. Rafael did not disclose details to the public, but observers at the show said it seems to be shorter than previous Spike missiles and has a different propulsion system.

Delivery Delayed

The Defense Ministry has ordered Elta Systems, a subsidiary of IAI, to delay delivery of two electronic support systems slated to be installed by Boeing in early-warning aircraft due to be supplied to Turkey, according to a report in the American Defense News. The publication says that the ban poses a threat to cooperation between IAI and Boeing, and quotes concern by unnamed Israeli defense sources about the effect on U.S.-Israeli trade relations.

Elul Group News Analysis - February 2012

General News Summary

Iranian Threat Looms

The Iranian threat looms larger and larger on the Israeli consciousness as debate continues over a possible preemptive strike against Teheran's nuclear capabilities before the Islamic Republic actually produces a bomb. In early February, Chief of Staff Lt.-Gen. Benny Gantz told a security conference in Herzliya that the international community must take “determined action” against Iran's nuclear push and Maj.-Gen. Aviv Kochavi, chief of IDF Military Intelligence, said that the Iranians already have enough fissionable material to produce four bombs.

Nuclear Iran was also the main topic on the agenda during the late-January visit to Israel of US Chief of Staff Gen. Martin Dempsey. At least one unconfirmed report said that President Barack Obama has dispatched Dempsey to stop Israel from launching an attack on its own. The reports contradict reassurances from no less than Defense Minister Ehud Barak, who said in mid-January that an Israeli attack on Iran is “very far off,” and stated last December that a nuclear Iran does not pose an existential threat to Israel. Nevertheless, he left the military option open – if international sanctions do not succeed.

On the other hand, Dr. Ronen Bergman, an Israeli journalist and Iran expert, suggests that, perhaps for the first time, the conditions for an Israeli attack may be right. In a widely-quoted article in the New York Times Magazine, Bergman outlines three questions which must be answered in the affirmative before Israel takes action:- is Israel able to cause enough damage to bring about major delays in Iran's nuclear project? Does Israel have “overt or tacit support, particularly from America” for such an attack? and have other means of containment been exhausted? According to Barak, many Israeli leaders now believe that the answer to all three questions is “yes.”

Added indication might be taken from statements made in early February by Strategic Planning Minister and Vice-Premier Moshe (Boogie) Ya'alon. Ya'alon, a former chief of staff, said that the West has the capability of hitting all of Iran's military nuclear facilities. A Washington Post report says US Defense Secretary Leon Pannetta believes there is a “strong possibility” that Israel could attack Iran by this spring. The report, by analyst David Ignatius, says US officials indicate that Washington does not have concrete intelligence on definite plans for an attack, but believe that Israel has made contingency plans and tentative preparations for an operation. The feeling in Washington, according to the report, is that the Israeli leadership has not yet made a final decision to attack Iran.

Look Who's (Not) Talking

Prime Minister Benjamin Netanyahu has asked world leaders to press the Palestinians to continue a series of pre-negotiation meetings held in Amman, Jordan during the month of January. The Israeli leader made the request, over the span of less than two days, to US Secretary of State Hillary Clinton, U.N. Secretary-General Ban Ki-moon, Quartet envoy Tony Blair and German Foreign Minister Guido Westerwelle.

The Palestinians, however, don't seem interested. At about the same time, Netanyahu made his requests, Palestinian President Mahmoud Abbas was saying that the talks had ended. He did, however, leave open the possibility that they might be resumed, but only under certain conditions, after his consultations with representatives of the Arab League in early February.

The Palestinians say that there was little or no progress in the five meetings held in Amman, which were part of an international effort to get both sides back to formal peace negotiations. They say that Israel must present concrete proposals on borders and security for the talks to resume, sticking to their interpretation of the three-month deadline to produce such proposals made in the request by the Quartet – the US, UN, EU and Russia – on October 26. Israel contends that the three-month period only started on January 3, when the Amman talks began, and that the deadline is in April.

Outside observers suggest that both sides are merely posturing. The Palestinians are interested primarily in seeking international intervention, as exemplified by their request last September for UN membership, while Israel's current coalition government ideologically refuses to make the kind of concessions that the Palestinians demand.

No Elections, Yet...

Prime Minister Benjamin Netanyahu says that Israel's next elections may not take place for quite a while, but in any event he has taken the first step towards being ready for them. In late January, Netanyahu was re-elected to head the Likud, Israel's ruling party, defeating right-wing challenger Moshe Feiglin and garnering 77% of the vote.

At the same time, two of the other three large parties were readying themselves for an election: Kadima, now led by Tzipi Livni, will hold its own leadership primaries on March 27 while Labor already has a new leader, MK Shelly Yachimovich, elected last fall.

Netanyahu's Denial

Prime Minister Benjamin Netanyahu has denied a report by a journalist, who said the Israeli leader told him that Israel's two biggest enemies are the New York Times and Israel's Ha'aretz newspapers. Steve Linde, editor of the Jerusalem Post, told a Tel Aviv conference that Netanyahu made the remark to him in a private meeting “a couple of weeks” earlier.

“'You know, Steve, we have two main enemies,'” Linde said Netanyahu told him, according to a recording of the Tel Aviv speech provided to the Jewish Telegraphic Agency. “And I thought he was going to talk about, you know, Iran, maybe Hamas. He said it’s The New York Times and Ha'aretz. He said they set the agenda for an anti-Israel campaign all over the world. Journalists read them every morning and base their news stories … on what they read in The New York Times and Ha'aretz.”

Linde later published a “clarification,” at the request of the Prime Minister's Office. In it he said that his remarks were an interpretation of what Netanyahu had told him.

Tops in Cyber Defense

Israel was one of the top three countries (with Finland and Sweden) in defense against cyber attacks, according to a survey of leading experts in the field conducted by the McAfee Internet security firm. The three countries scored 4.5 (out of 5) in perceived quality of their ability to cope with attacks. The US, Spain, France, Estonia and the Netherlands each had a ranking of 4.0, while Mexico, Brazil and China were among a group of countries least able to defend themselves against cyber attacks, according to a report in the Globes business daily.

Neighbor Watch

The victory of Islamist parties in Egypt's parliamentary elections is unsettling for Israelis, whose concerns were dismissed a year ago when they said that the Arab Spring, heralded in the world as a move towards greater freedom, could bring radical governments to power. Speaking in December, Defense Minister Ehud Barak called election results “very, very disturbing.” Though Egypt's interim leader, Field Marshal Mohamed Hussein Tantawi, has said Egypt will honor the 1979 peace treaty with Israel, Israelis are far from sure that future governments will take the same position.

There are also questions about what will happen if and when the Syrian regime of President Bashar al-Assad falls. Particularly unsettling is the reported presence of Iranian Revolutionary Guard units helping Assad's troops against his own people.

The Economy

In Contrast to Europeans

Standard & Poor's early-January downgrading of the credit ratings of nine European countries including France serves to highlight the strength of the Israeli economy, Prime Minister Benjamin Netanyahu pointed out at the start of a January 15 cabinet meeting. Only four months ago the same agency raised Israel's credit rating, he pointed out with pride, saying: “The Israeli economy stands out, positively, as a result of our responsible policy. We are not breaking the budgetary framework. We are upholding the first rule in managing an economy, whether of a family, a firm or a country; over time, one does not spend more than what one brings in, than what one makes. And if you did so, you make the correction gradually. This is what we are doing...”

GDP – 4.8% Growth in 2011

Israel's Gross Domestic Product (GDP) grew by 4.8% in 2011, according to an early-January report of the Central Bureau of Statistics. In general the performance of the Israeli economy exceeded that of fellow member countries of the OECD, the Organization for Economic Cooperation and Development.

Per capita GDP, up 2.9%, was double the OECD average. GDP growth, at 4.8%, was more than double the US 1.7% and the OECD's 1.9%. Average unemployment was 3.6% (9% in the US, 8% in the OECD).

Towards the end of the year, growth rates slowed. In the third quarter, GDP increased at an annualized 3.9%, in the fourth the figure was 3.7%.

Deficit to Grow

An anticipated NIS 11B (about $3B) shortfall in tax revenues has caused the Treasury to raise its estimate of the 2012 budget deficit from the 2% of GDP set in the 2010 biennial budget to 3.4%, Finance Minister Yuval Steinitz said.

Low Unemployment

Israeli unemployment in October was not a record 5%, the Central Bureau Statistics said in early January, correcting an earlier announcement. Instead, the CBS said that joblessness in October-November stood at 5.4%, following 6.2% in January and 5.6% in May.

Merrill Lynch Prediction

The Israeli economy will grow by 3.5% in 2012, according to projections of Bill O'Neil, the chief investment officer at Merrill Lynch. In O'Neil's assessment, possible difficulties encountered due to the fact that 17% of Israel's economy is linked to exports to European countries currently in financial trouble will be compensated for by Israeli consumption, “which will preserve the GDP.”

Last November, the OECD predicted Israel's 2012 GDP would grow by 2.9%.

Interest Cut

The Bank of Israel cut its basic interest rate by 25 basis points to 2.5% in late January, due to the continued economic slowdown. The cut follows previous reductions, of 25 points each, in September and November 2011.

India Agriculture Links

Israel will open three “centers of agricultural excellence” in India's Maharashtra State, Israeli Consul-General Orna Sagiv said in mid-January. The centers will be in Nagpur, which will specialize in citrus technology, Dapoli and Rahuri. Sagiv also noted that there are 25 Indian students in Israel, taking courses in agricultural technology.

Taking it Easy(Jet)

Low-rate airline EasyJet carried 225,000 passengers on its Israel-Europe routes in 2011, 55% more than in 2010. Part of the reason was a second Israeli route, Basel-Tel Aviv, which began in December 2010, and the subsequent increase of flights from three to four per week.

Diamond Exports

Diamond exports by Israel's top 25 companies totaled $2.4B in 2011, the Ministry of Industry, Trade and Labor has reported. Total net exports of polished diamonds were $7.2B. After many years, the Lev Leviev firm lost its top ranking among exporters to Leo Schachter diamonds, with $403M in diamond exports. Leviev did not disclose the volume of his firm's exports.

Export Shift

The 27 EU member states supplanted the US as Israel's top export destination in 2011, according to an analysis of Central Bureau of Statistics data released in late January by the Meitav Investment House. Exports to Europe, which now account for a third of Israel's total exports, rose by 20% since 2009, according to Meitav, while exports to the US declined by 2%.

The top European destinations for Israeli exports in 2011 were the UK, where exports rose 53% to $10B, the Netherlands, Germany and Turkey, despite the deterioration of Jerusalem's relations with Ankara. Exports to China tripled in 2011, reaching $1.85B.

Gas Deals

The partners in Israel's Tamar offshore natural gas field have signed a $750M contract to supply gas to Israel's Hadera Paper Co. The contract is the fifth signed by the group, following deals worth $ 5B with Dalia Power Energies, $1.2M with Maktsehim Agan Industries and two deals totaling $1.2B with Ramat Energy Negev and Ashdod Energy, both private companies. The biggest deal of all, a $17B contract with the Israel Electric Corp., is still pending.

Tamar partners are Noble Energy of the US (36%), Yitzhak Tshuva's Delek Group (31%), Isramco (28%) and Dor Alon Energy (4%).

Eilat Railway Discussed

The cabinet on January 29 began a series of discussions on a proposal to build a new rail line to the Red Sea port-resort city of Eilat. Prime Minister Benjamin Netanyahu said that the project, whose initial cost estimates are in the $2-3B range, would impact Israel's economy for the next 50 years by creating a more convenient link with China and India, the world's fastest-growing economic powers.

Gas Talks

The Israel Electric Corp. is negotiating with the partners in the new Tamar gas field (Yitzhak Tshuva Delek Group, Noble Energy of the US, Alon and Isramco) for the purchase of 1.5-2 billion cubic meters of gas a year, in a deal valued at $4B. East Mediterranean Gas Company currently supplies gas to the government-owned utility company.

Finance & Investment

Top-Rated Deals

Two Israeli deals were on the New York Times list of the 18 most interesting deals of 2011. The sale of pesticides maker Makhteshim Agan Industries to the China National Chemical Corporation (ChemChina) priced Makhteshim Agan at $2.4B and was one of the biggest deals any Chinese company has ever closed outside China. The other is the sale of Fundtech to the US equity fund GTCR at a company value of $318M. The seller in both deals was Nochi Dankner's IDB Group.

$5 Billion from Tech Exits

2011 was the best year for Israeli high-tech investors since 2006, according to a report in Calcalist, the economic supplement of the Yediot Aharonot newspaper. The paper tallied 58 mergers, acquisitions and public offerings during the year, creating revenues of $5.12B. Largest acquisitions were of digital advertising enabler MediaMind by DG for $517M and the $484M acquisition of chipmaker Zoran by CSR.

Meanwhile, Globes reported that Israeli interested parties, including company officials, realized about NIS 3B ($800M) from exits on Wall Street over the course of 2011. Largest by far was the $351M from SodaStream, to the Fortissimo Fund, Kendray Properties, Keswick Properties and Real Property Investment.

Start-Up Funding Up

Israeli start-ups raised $2.14B in 2011, an 11-year high, 70% more than the $1.26B raised in 2010, and 91% more than the $1.12B raised in 2009, according to the quarterly survey of the IVC Research Center and KPMG Somekh Chaikin. According to the survey, 546 start-ups raised new capital in 2011, up from 2010's 391.

Fimi Gets High Rating

Fimi, the Tel Aviv-based mezzanine private equity fund founded by Yishai Davidi, was ranked fourth in the world in a 2011 rating of 5,700 equity funds conducted by Prequin, a US alternative assets intelligence specialist Fimi, the only Israeli fund in operation long enough to be rated, had an IRR (Internal Rate of Return) of 31%. Several non-Israeli funds that invest in Israel were also rated: TPG, with holdings in the Strauss coffee business, had an 18% IRR; Apax Europe VI, which purchased the Tnuva food distributors in 2007, 9.6% IRR; and Apax V, a partner in Bezeq Telecom, 28.9%.

Cyber-Ark Raises $40 Million

Israeli-American Cyber-Ark Software has raised $40M in a December financing round led by Jerusalem Venture Partners and Goldman Sachs. Founded in 1999, Cyber-Ark develops solutions for protecting applications and sensitive data against both internal and external threats, on the principle of a digital safe.

End of an Alliance

American businessman Louis Pell has brought suit against his former partner Prof. Shlomo Ben-Haim over about $60M worth of Johnson & Johnson shares and dividends he claims Ben-Haim withheld from him. Pell and Ben-Haim, who is one of Israel's leading technology entrepreneurs, had worked together since 1993, when they founded Biosense, a developer of mini-sensors for diagnosing cardiac problems. They were also partners in Medinvest, a holding company for nine medical technology companies.

Kenshoo for Sale?

Venture capital firm Sequoia is exploring possible buyers for Tel Aviv-based Kenshoo, whose technology accelerates and enhances Internet advertising campaigns. Calcalist says that the asking price is based on a company valuation of $300-400M. The technology of Kenshoo, which also has offices in San Francisco, searches Internet traffic, marketing and advertising and social media for prospective clients.

Israel Ports-Indian Port Contract

A consortium of Israel Ports and India's Cargo Motors has won a contract to build a container port at Nargol, about 150 km. north of Mumbai. Initial investment in the project is estimated at $600M. About 18 groups initially expressed interest in the port project.

India as an Export Hub?

A free trade agreement between Israel and India will turn India into a hub for Israeli exports to the Middle East and other Muslim countries, an Indian banker said in late January. A. Purushothoman, CEO of the Israel branch of the State Bank of India, told a seminar at Tel Aviv University that India could be a gateway to Arab countries with which Israel has no relations, as well as Muslim Malaysia and Indonesia.

Diamond Mine IPO Mooted

Israeli businessman Benny Steinmetz intends to float shares of Octea, his Sierra Leone diamond mine holding company, on the Hong Kong Stock Exchange at a value of $2-3B, according to a report in London's Financial Times. The Koidu mine is expected to produce 500,000 karats of diamonds in 2012.

Mergers & Acquisitions

Akamai-Cotendo

Akamai Technologies, a specialist in accelerating Web content, has purchased Cotendo of Netanya, north of Tel Aviv, and Sunnyvale, California, for a reported $268M. The technology of Cotendo, founded three years ago, is designed to use “cloud-computing” to speed up the flow of data. It will be the first Israeli purchase for Cambridge, Massachusetts-based Akamai, though the main developer of the company's basic technology was Israeli-American mathematician Daniel Lewin. Lewin. born in Denver but raised and educated in Israel, was aboard American Airlines Flight 11, one of the two planes that was flown into the World Trade Center on September 11, 2001.

Potash Purchase Delayed

Israel's Antitrust Authority has delayed Potash Corp. of Sasketchewan Inc. deal to increase its 14% stake in Israel Chemicals Ltd. The authority said antitrust consequences of the deal are “under review.” The Finance Ministry, which has already approved the transaction with the Israel Corp., which controls Israel Chemicals, says Potash's offer has been under consideration for six months.

Allot Eyes Flash Networks

Advanced negotiations are under way between Allot Communications, a broadband management specialist, and Israel's Flash Networks. Projected purchase price for the Israeli company is in the $120M range. Allot, traded on Nasdaq and the Tel Aviv Stock Exchange at a market cap of $500M, develops technology that enables Internet service providers and wireless telephony carriers to monitor and manage their bandwidth, using the analysis provided by Deep Packet Inspection (DPI) technology. Wall Street analysts estimate sales of $76M for the company in 2011. Allot reportedly is interested in Flash's wireless networking capabilities.

Dankner Switches Directions

Businessman Nochi Dankner is seeking to switch purchasers in his effort to sell his IDB Holding Corp. holding in Israel's Clal Industries and Investments. In early January, Dankner broke off talks to sell IDB's 60% stake in Clal to Avraham Livnat Ltd., at a company valuation of NIS 3.8B (slightly less than $1B). At the same time, he opened negotiations to sell 40% of Clal to a new potential buyer, Viola Private Equity, which was also held.

Frutarom-Etol Tovarna

Frutarom Industries, an Israeli company whose shares are traded on the Tel Aviv and London stock exchanges, has acquired 56% of Slovenian company Etol Tovarna arom in etericnih olj for €19.6M and plans to make an offer to purchase the remaining shares traded on the Ljubljana Stock Exchange. Etol, founded in 1924, develops, manufactures and markets taste solutions, focusing on natural flavor products for the food and beverage industry. Frutarom, with 1,500 employees worldwide, markets over 20,000 products to more than 10.000 customers in 120 countries, has 45 offices and 27 labs worldwide, and operates 30 production facilities in Israel, Europe, North America and Asia.

Playtech-Geneity

Playtech Cyprus, controlled by Israeli Teddy Sagi, has acquired London-based e-gaming software for lotteries and online bookmaking, for £11M. Geneity's customers include bookmakers Ladbrokes, Betbair, Gala Coral and the British Health Lottery.

IBM-Worklight

IBM has acquired Worklight, a developer of applications for smartphones and tablet computers based in Shefayim north of Tel Aviv. Purchase price was not reported, but was said to be in the $50-$60M range. It was the 11th acquisition of a company based in Israel or with substantial Israeli operations for IBM, which has 1,100 employees in Haifa, Tel Aviv, Herzliya, Rehovot, and Jerusalem. Its largest Israeli acquisition was Storwize, for $140M in 2010.

ATX-Arcos

ATX Networks, a Canadian producer of cable television technology, has acquired Israel's Arcos Technologies for $26M. Based in Petah Tikva east of Tel Aviv, Arcos specializes in solutions for the home video network market.

GE Invests in Check-Cap

General Electric has acquired 5% of Check-Cap, developer of a colon cancer-detector. Price was not announced, but Globes said it was based on a company valuation of about NIS 170M (about $46M). Check-Cap, based on Mt. Carmel near Haifa, produces a capsule designed to compete with the camera-in-a-pill endoscopic technology of Given Imaging, another Israeli firm. Both technologies aim to replace conventional colonoscopy; the difference is that Given uses a camera and a light source while Check-Cap's is based on X-rays and does not require prior colon cleansing. The investment was made through GE's Healthyimagination Fund, and runs parallel to Check-Cap's plan to raise $20-25M in a private placement.

Amobee-Singtel Talks

Acquisition talks are under way between Singapore Telecommunications and Amobee, an Israeli developer of mobile advertising technology. Potential purchase price by the Singapore Company is said to be $300-350M, according to a report in Globes. Amobee, whose customers include Google, Nokia, Skype, and eBay, was named the most promising Israeli start-up of 2008-9 by Globes.

Its investors include Sequoia Capital, Accel Partners, Globespan, Motorola Ventures, Cisco Systems, Telefonica AS and Vodafone.

M&A Outdistances IPO

Mergers and acquisitions far outstripped initial public offerings for Israeli companies in 2011: M&A exits brought in $5.2B, while Imperva, the only major Wall Street IPO (on the New York Stock Exchange) raised $90M. This is in keeping with the trend in the US where M&A's rose by 26% while the number of IPO's declined, points out Globes columnist Batya Feldman.

Teva's India Rumor

Teva Pharmaceuticals has declined to comment on reports that it is a contender to purchase India's Micro Labs Ltd. for about $2B. VCCircle, an Indian website, says that Pfizer and private equity buyout firms are also interested in Micro Labs, a Bangalore-based manufacturer of generic drugs. Previous other large Teva acquisitions include Ratiopharm of Germany in 2010 for $5B and Cephalon last May for $6.8B.

Nestle Increases Osem Stake

Gad Propper, a member of the founding family of Osem, one of Israel's largest food manufacturing firms, has sold his 5% stake in Osem to Nestle for NIS 371M (about $100M). Nestle, which acquired control of Osem in 1995, now holds almost 59% of the firm's equity.

ECI on the Market

ECI Telecom controlling shareholder and chairman Shaul Shani has allegedly again put the Israeli telecommunications equipment firm up for sale to the Russians. A year ago, Shani reportedly offered ECI to Russian President Dmitry Medvedev for $2.5B. This year, the potential buyer is state-owned Rosatom Nuclear Energy State Corporation, and the price is much lower.

According to Russia's Izvestia newspaper, a $5B valuation is being bandied about in a deal that involves merging ECI into Rosatom, though it is estimated that the price of ECI itself as part of a complicated package would be around $500M.

Science & High Technology

Teva's New CEO

Dr. Jeremy Levin, a former senior executive at Bristol-Meyers Squibb, will replace Shlomo Yanai when the Teva Pharmaceuticals CEO retires in May, the company has announced. In his five years as CEO, Yanai took Israel's world-class pharmaceutical company from a business specializing in generic drugs with $8.4B in annual revenue to a more diversified business with anticipated 2012 revenue of $22B and expanded presence in  European and Latin American markets.

In late December, Teva announced a $3B plan to purchase back about 8% of its shares at the then-current share price, $42.30 (Teva shares closed at $45.89 on February 2, 2012). Yanai said the purchase reflected the firm's confidence in its long-term prospects.

Tremor Treatment Trial

InSightech, controlled by Israeli businessman Motti Zisser's Elbit Medical, has reported success in the safety and efficacy clinical trial of its ExAblate 4000 focused ultrasound treatment for the treatment of essential tremor. The trial was for 15 patients at the University of Virginia School of Medicine. The ExAblate 4000 is also involved in clinical trials for the treatment of chronic neuropathic pain and on brain tumors, in preclinical studies of the system for the destruction of blood clots, which cause strokes, and for the delivery of medication to the brain. InSightech is based in Tirat Hacarmel, near Haifa.

Prize-Winners

Jimmy Levi and Inis Said, respectively the founder and CEO of Nazareth-based Galil Software, have been named winners of the Prime Minister's Prize for Initiatives and Innovation in the for-profit sector. The four-year-old firm was cited for its pioneering work in changing the employment map for young engineers in the Israeli Arab sector. It employs more than 140 technology professionals.

Vegas Presence

More than 30 Israeli companies showed their wares at CES 2012, the annual electronic gadgetry show held in Las Vegas in early January. Among them were Siano, maker of mobile TV receiver chips for tablets and cellphones; Jinni, developer of voice-controlled video games; Lumus, maker of video-receiver eyeglasses; PrimeSense's gesture-control of video devices; and wireless-rechargable cellphone batters from Powermat.

Record Year at Checkpoint

CheckPoint Software, Israel's world-class developer of firewall Internet security systems, set records in 2001. Its revenue rose 14% to $1.25B from $1.1B in 2010. GAAP (Generally Accepted Accounting Principles)-based and net profit rose 20% to $544M ($2.54 per share) from $452.8M in 2010, and non-GAAP net profit rose 16% to $613.6M ($2.87 per share) from $528M. The figures topped predictions by analysts.

ALS Advance

Brainstorm Cell Therapeutics, based in Petah Tikva and New York, announced positive interim results in Phase I clinical trials on its stem-cell treatment of Amyotrophic Lateral Sclerosis (ALS, also known as Lou Gehrig's Disease). The trial showed improvement in the patients' ability to breathe and swallow. Muscular function also improved. There is still no known cure for ALS, a terminal disease.

Intel Reshuffle

Mooly Eden has been named as the new general manager of Intel Israel, according to a report in Globes. The chipmaker's current GM, Maxine Fassberg, will be in charge of relations with the Israeli government, a post subordinate to that of Eden, the former head of Intel's Haifa R&D center.

Mobli's Celebs

Cycling icon Lance Armstrong, seven-time winner of the Tour de France, has entered into a collaboration with Mobli, an Israeli start-up. Armstrong's activities, in training and as head of a foundation assisting cancer patients, will be featured on the photo-and-video-sharing service being developed by Mobli, and will join the company's board of director. A few months ago, actor Leonardo DiCaprio joined Mobli as an investor and marketing consultant.

Aerospace & Defense

US Missile Aid

In the midst of its drive for budget cuts, US Congress voted to allocate $235M for continued development of Israel's David's Sling and Arrow 3 anti-missile systems. In addition, the annual $3B defense aid allocation to Israel will remain untouched.

David's Sling, developed by Rafael Advanced Defense Systems and Raytheon, is designed to counter short and medium-range rockets and missiles; when it becomes operational, Israel Aerospace Industries' Arrow 3 will be able intercept incoming ballistic missiles in space.

IAI's Nissan to Step Down After Negotiating $1.1 Billion Deal

Israel Aerospace Industries CEO Yitzak Nissan will step down at the end of the year, when his contract expires, according to a report in Globes. Relations have been tense for some time between Nissan, 66, and Dov Barahav, chairman of government-owned IAI, who questions Nissan's ability to lead the defense contractor through the process of privatization and to mix the company's thrust on defense with commercial products.

Nissan reportedly led IAI's successful negotiation of a just-announced $1.1B sale of missiles, anti-missile missiles and unmanned aerial vehicles to an unnamed Asian country, not India. A second stage deal will increase total value of the deal to $1.6B, according to Globes.

IMI Privatization Advances

A plan for the privatization of government-owned Israel Military Industries is due to be presented to the Finance Committee of the Knesset, Israel's parliament, before the end of March, according to a report in Globes. Under the plan, the defense contractor will be offered for sale as a single unit, and will include the dismissal of 950 employees. Possible bidders for IMI include Elbit Systems, Israel's largest private defense contractor; the SK Group and Plasan Sasa Ltd., the armored vehicle specialist owned by Kibbutz Sasa, on Israel's northern border. Israel's two other government-owned defense contractors, Israel Aerospace Industries and Rafael Advanced Defense Systems, will not be permitted to place bids. According to Globes, the Histadrut trade union federation has agreed to the deal.

Turkey Contract Cancelled

Elbit Systems and Israel Aerospace Industries have been ordered to cancel a contract to supply airborne intelligence-gathering systems to the Turkish Air Force. The Defense Ministry cited “diplomatic considerations” when giving notice that it would not renew export licenses necessary to fulfill the contract, which was signed by Elbit's El-Op unit and IAI's Elta in 2009.

A few weeks after the cancellation, Elbit signed a $50M contract to supply the Hermes 900, its largest unmanned aerial vehicle, to an unnamed South American country.

Rafael's US Award

The US Department of Defense has awarded Israel's Rafael Advanced Defense Systems with a Certificate of Appreciation for its continued support of American operations in Iraq and Afghanistan. The certificate called Rafael “an outstanding industry partner in the production of Reactive Armor for the Stryker and Bradley Fighting Vehicles,” citing the Israeli defense contractor's “contribution to the survivability of the United States service members in harm's way, and to its commitment to delivering quality hardware in an expeditious manner, leading to unmatched support to the warfighter.”

French Offer Heron to NATO

France is offering the Heron, jointly made by Israel Aerospace Industries and Dassault Group Sa, to NATO as its contribution to the alliance's Ground Surveillance Program, according to a report in Defense News. The Heron is a medium-altitude, long-endurance (MALE) UAV.

Maneuvers Postponed

Operation Austere Challenge 12, the largest-ever joint US-Israeli military exercise, has been postponed at Israel's initiative, according to reports from the Jewish Telegraph Agency and The Atlantic, a US magazine. The reason given, according to the reports which were quoted in the Globes, was budgetary. The exercise, due to take place in the Negev in the coming months, was to involve about 5,000 soldiers from both countries in various ballistic-missile defense scenarios.

AMOS 5 Operational

Spacecom, controlled by the Eurocom Group of businessman Shaul Elovich, began commercial operations in late January. Built by Russia's Information Satellite Systems, Amos 5 is Spacecom's first satellite not built by Israel Aerospace Industries, a former shareholder in Spacecom.

Launched in mid-December, Amos 5 covers Africa, Europe and the Middle East and has a 15-year anticipated lifespan.

Arrow Partnership

Israel Aerospace Industries and Boeing have marked the 10th  anniversary of their collaboration on the Arrow anti-missile missile program with a new agreement to develop missile-defense opportunities. IAI is the prime contractor for Arrow, the world’s first operational national missile defense system. Together with Boeing, it is already developing the next-generation Arrow 3.

Arrow to Korea?

The Defense Ministry has denied a report in the usually authoritative Defense News magazine claiming that South Korea could become the first foreign export for made-in-Israel Arrow missile defense systems. The potential deal, if it materializes, would make Seoul the first foreign customer for Arrow, versions of which are already operational in Israel. The Arrow is manufactured by IAI and Boeing, who are also developing the longer-range Arrow 3, capable of intercepts outside the Earth's atmosphere.

India is another potential customer for the Arrow; possible sale of the system has already been authorized by the US and Israel.

Italian Inducement

Italy has improved its chances of winning an Israeli Air Force contract for jet trainers by agreeing to cooperate on the development of a new Israeli intelligence satellite, according to a late-January report in Globes. The Alenia Aermacchi
M-346 trainer and the T-50 Golden Eagle, made by a Korean Aerospace Industries-Lockheed Martin partnership, for the trainer contract.

Allot Cleared

An Israeli Defense Ministry investigation has concluded that Allot Communications did not know its Internet monitoring software equipment had been sold to Iran. The Bloomberg news agency reported late last year that the sale of deep-packet inspection technology to monitor e-mail and Internet messages had been made through a Danish distributor.

Human Error Caused Heron Crash

Ground controllers apparently exceeded the test flight parameters of a Heron UAV, one of IAI's flagship products. The top-secret Heron, which costs about $10M and is called Eitan in Hebrew, is a fourth-generation medium-altitude system featuring fully automatic take-off and landing, deep-penetration capabilities for real-time intelligence gathering capable of carrying payloads of up to 250kg. The Israel Air Force has been operating the Heron, which is capable of staying aloft for 52 hours. The crash occurred shortly after take-off from the base of UAV Squadron 20 at Palmachim, on the coast south of Tel Aviv.

Radio Days

The Israel Defense Forces has upgraded its tactical communications infrastructure with the purchase of a variety of encrypted devices capable of transferring data from Elbit, the Israeli private defense contractor. The devices supplied to the IDF Ground Forces Command over a four-year period include Elbit's CNR-70, which has encryption and anti-jamming capabilities and can quickly hop between a wide range of frequencies.

Reciprocal Purchases

Representatives of General Dynamics Land Systems met with Israeli companies in mid-January, to discuss a $160M offset purchases the US contractor is obligated to make as part of its contract to produce the body of Israel's Namer armored personnel carrier in the US.

Galant is Back to Sea

Yoav Galant, whose appointment to be IDF chief of staff failed to be ratified, has a new job. The retired major-general has been named chief executive of Nammex, a private exploration company owned by Israeli mining magnate Benny Steinmetz. Nammex, formerly known as Scorpio Gas and Oil Exploration, owns 42.5% of six offshore drilling licenses near the Leviathan, a proven gas discovery.

Elul Group News Analysis - December 2011

 General News Summary

Shalit Freed

Private Gilad Shalit, held by Hamas since he was kidnapped in June 2006 was released on October 18 after more than five years in captivity. The release came after a long public campaign by the soldier's family, and off-and-on negotiations with Hamas through German and Egyptian intermediaries. The deal, in which Israel agreed to free more than 1,000 Palestinian terrorists held by Israel, faced strong opposition from the families of the victims and others who claimed that freeing master killers of civilians would increase the danger of new attacks against Israelis. Observers say that the ultimate agreement, which was not very different from previous deals which fell through at the last minute, was the result of a window of opportunity in which both sides were willing to show flexibility – Prime Minister Benjamin Netanyahu due to pressure from domestic social protests and Hamas because of changing relations due to the effect of the revolution in Egypt.

Iran Debate

In public and behind closed doors, a heated debate is going on in Israel over whether or not to attack Iran before the Islamic Republic builds its nuclear weapons. According to published reports, both Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak favor such a preemptive attack. One Ha'aretz reporter characterizes the prime minister's attitude as "wanting to be the one who saves Israel from another Holocaust."

Among the most vocal critics of such a move, which would be comparable to Israel's 1981 destruction of the Iraqi Osiris reactor before Saddam Hussein could build a bomb, is Meir Dagan, the recently retired chief of the Mossad, Israel's overseas intelligence agency. Dagan believes that Iran is on the way to build a bomb, but it won't have that capability for several years. Others give credence to Iranian threats that it wants to destroy Israel and will wage an all-out attack on Israel if an operation against its nuclear program is launched by Israel or anyone else.

Turkish Deal Mooted

Turkey will establish a special fund for compensating its citizens killed in the May 2010 Israeli takeover of the Turkish flagship Mavi Marmara, which led the ill-fated attempt to break Israel embargo on Gaza. The US made an elaborate proposal to resolve the still-simmering Israeli-Turkish crisis, according to a report in Ma'ariv. The paper said that the two countries will give each other flexibility to explain the deal to its own citizens, with Turkish Prime Minister Recep Tayyip Erdogan saying that Israel apologizes for the Mavi Marmara deaths while Israel's Benjamin Netanyahu declares, after a secret phone call between the two leaders, that he expressed regret.

Greek Air Exercise

Israel hosted Greece's Hellenic Air Force for a secret joint exercise in mid-November, according to a report in Ha'aretz. The Greeks sent five F-16 block 52 fighter jets for a five-day exercise at the Uvda airbase not far from Eilat. Israeli F-15 and F-16 jets, and tanker aircraft also participated in the exercise. In contrast with previous IAF exercises which took place in Greece, November's drill was not publicized by the IDF Spokesperson.

Ha'aretz said that Israel has been carrying out large-scale drills in foreign skies and inviting foreign air forces to use its training facilities. A mission from the Italian Air Force was due to arrive in Uvda in mid-December, as part of the effort to strengthen cooperation with European air forces.

Israel-South Sudan Warming Environment

An article in the Sudan Tribune, December 6

The Khartoum's ruling party mouthpiece, al-Intabaha is reporting that Israeli Prime Minister Benjamin Netanyahu will pay a historic one day visit to South Sudan, where the Prime Minister will hold meetings with both political and military leadership of South Sudan. As a sworn enemy of the Jewish people, Khartoum is anticipating such events with great deal of suspicion. For a very long time, Khartoum has been pointing fingers against 'Zionists' for meddling in the conflicts that the regime orchestrated and nurtured in the country. Nonetheless, the historic ties of the Jewish State to the people of South Sudan has its deep roots in the sheer struggle of the people of South Sudan, which dates back to the early 1960s. In 1960s through earlier 1970s, Israel was overtly assisting South Sudanese freedom fighters with weapons, training, and even sending in mercenaries, in order for the Southerners to resist against the onslaught of the regime in Khartoum.

At the time, which was the height of Cold War, Israel presented itself as an alternative, by curving a niche of its own little influence in the continent, which was a battleground for the Cold War warriors. Since then, Israel has diagnosed so well the regional threats and the shared strategic mutual interest it has in South Sudan and the entire East African region. The Jewish State figured out that it could not abandon the fate of the region to be ultimately determined by the two warring superpowers. Hence, Israel establishing significant and long lasting relationship with the East African region.

When South Sudan gained its independence, Israel never wasted much time, but rather moved swiftly to establish a full diplomatic relationship with the newly independent state of South Sudan. Therefore, it will not be a secret that Israeli leaders will meet soon South Sudanese leadership to discuss issues of mutual interest. After all, in September of this year, President Salva Kiir and Prime Minister Benjamin Netanyahu had met at the sideline of UN general assembly meeting. If anything, the Israeli-South Sudan relation needs to be enhanced, particularly at this point and time, where both countries have more in common.

Israel is already considering Sudan as a gateway for weapons smuggling—weapons which often originate from Iran through Sudan and into Egypt and finally, destined for Gaza Strip. As a proof, Israeli Air Force and commandos, managed on several occasions to intercept and destroy weapons bound for Gaza as they are being docked of Sudanese sea port. The Sudanese weapons smuggling ring clearly poses serious security risk to the state of Israel.

Sudan has also over the years established itself as a fertile ground for Islamic radicalization. Many brands of the radical jihadists and terrorist outfits, including the al-Qeada, Hamas, Hizbullah, and Islamic Jihad, called Khartoum home. Khalid Mishaal, the leader of Hamas just concluded a successful official visit in Khartoum, where he was hailed by his host as a hero.

Another issue of serious Israeli concern with Sudan is the country's cozy relationship with Israel's foe, Iran—a country that stands ready to wipe Israel off the face of the earth. Since taking power forcefully in the year 1989, the Islamic regime in Khartoum immediately made contact with Iran, flying in Iranian military trainers to model the country's armed forces along the dreaded Iranian Revolutionary Guards—a military built with clear aim to safeguard the Islamic system. That is why it is not surprising that Sudan is a major Arab country that forms the unholy Iranian-Arab alliance, alongside Syria, Hizbullah, Hamas and Islamic Jihad. The strength of this alliance is clearly evidenced when a delegation of this group traveled to Khartoum, led by Ali Larijani, the speaker of the Iranian parliament to express their full support for President Omar al-Bashir in wake of issuance of international arrest warrant against the Sudanese president.

With the anticipations of unpredictable governments in the neighboring countries, due to the recent Arab upraising, Israel stands a better chance by strengthening the old alliance to the South. Thus far, two of the principals of East African countries of Kenya and Uganda, have respectively made separate trips into Israel, in efforts to bolster the existing relationships. Therefore, South Sudan boosting of relationship with Israel is an added bonus to the regional strategic interest.

Israel's 10th Nobel Prize

Prof. Daniel Schechtman, 70, of the Technion Institute of Technology in Haifa, was awarded the Nobel Prize for Chemistry in a ceremony in Stockholm in early December. Schechtman, who was recognized for his discovery of quasicrystals, a previously unknown structure, was Israel's 10th Nobel laureate.

Pre-Elections Move?

Prime Minister Benjamin Netanyahu is moving up his Likud party primaries to January 31, 2012, apparently to take advantage of his strong position and win early re-election as the party's leader. The move also allows for the possibility of a break-up in the ruling coalition. Other potential candidates for the ruling party's leadership may include Deputy Prime Minister Silvan Shalom and Moshe Feiglin, leader of the far-right Manhigut Yehudit (Jewish Leadership) faction inside the party.

Channel 10 in Trouble

The Knesset Economics Committee, in a coalition party-line vote, refused to delay Channel 10's payment of NIS 60M (about $16M) owed in royalties. Coalition members claim that a moratorium would be nothing more than a subsidy to the station's main shareholders, multimillionaires Ron Lauder, Arnon Milchan and Joseph Maiman. Supporters of the request to delay accuse that this is an attempt to muzzle the channel's news department, which often airs investigations that are critical of the government, coalition members and ministers.

CSK Not Immigrating

Dominique Strauss-Kahn, the former head of the IMF, and his wife Anne Sinclair, a French journalist, have denied reports that they plan immigrating to Israel. The French media speculated that the couple were about to move to Israel after they paid a surprise visit to the country in late November. Strauss-Kahn and Sinclair, were in Israel as guests of French-born businessman Jean Friedmann, a former owner of the French TV station Canal Plus, at his Savion home.

Pipeline Blown Up Again

The pipeline carrying natural gas across the Sinai Peninsula to Israel and Jordan from Egypt was blown up again, for the ninth time this year, in late November. Globes said that terrorists attacked the pipeline in retaliation for the arrest of six Islamic Jihad members in Egypt, in advance of the first round of parliamentary elections in the country. The Israel Electric Corp. reportedly is looking for sources of liquefied petroleum gas (LPG) as a replacement for Egyptian gas, even though LPG is 2-3 times more costly.

Healthy Situation?

Israel spends less on healthcare but Israelis live longer, according to an OECD (Organization for Economic Cooperation and Development) survey. In 2009, Israel spent an average of 7.9% of its GDP on health compared with the OECD average of 9.6% of GDP. Moreover, the survey found that Israel has not raised GDP spending on health for 15 years, and said that public funding of health services in Israel amounts to 58% of the total compared with the OECD average of 72%.

Nevertheless, the same survey said Israeli average life expectancy is 80.6 years compared with the OECD's 79.5, and Israeli cancer and breast cancer survival rates are far higher than for the OECD as a whole.

World Title

Lee Korzitz, a 27-year-old windsurfer, took first place in the Women's RS:X class at the Sailing World Championships, held in early December in Perth, Australia.

The Economy

Budget Cuts Planned

The Finance Ministry is working on an eventuality plan for an across-the-board slashing of all ministry budgets, except education, if the global economic decline continues, according to a late November report in Globes. That would include an NIS 3B (about $800M) reduction in the defense budget.

There are increasingly strong signs that the world's problems may affect Israel, including an NIS 5B shortfall in tax collections and declining exports to both North America and Europe.

Nevertheless, the Bank of Israel said in a report that there was no immediate need to cut the budget and there would not be one unless concern about the government's deficit, which it anticipates will run as much as 1% higher vis-â-vis GDP than budgeted, gets out of hand.

Steinitz Defends Actions

"We're fighting a hard defensive battle for the Israeli economy," Finance Minister Yuval Steinitz said in late November. Speaking at a conference in the Negev city of Sderot, he said that "The battle for the economy, the battle for society, and the security situation are all connected. This battle isn't only a defensive battle for the economy, but for Israel's citizens. We've been fighting for three years to prevent mass unemployment of the kind seen in Spain, Italy, Ireland, Portugal, and the US... When I took up office, Israel's unemployment rate was projected to reach 10-15%, which would widen gaps and hurt millions of people and the poor." Heckled by demonstrators who charged him with "dismantling society" rather than caring for it, Steinitz boasted that the current government has succeeded so far "in preventing mass unemployment in Israel and creating growth, but this achievement must be fought for to continue. Education and welfare are important, but unemployment is the most important, even if times are tough. We must encourage investment in Israel, rather than drive away businesspeople."

Defense Minister Ehud Barak, who is fighting a running battle with Steinitz over the defense budget, said that cutting the defense budget now would repeat the mistake in the run-up to the 2006 Second Lebanon War. "My position is clear - defense is the existential condition, and with all the pain, it precedes quality of life. There is always room for streamlining, but the response to basic needs is Israel's insurance policy against our nation's environment in the Middle East."

Speaking at a business conference in Tel Aviv, Barak said that the "Arab Spring" is "the most important event in the region since the fall of the Ottoman Empire a century ago. Whole nations are rising up and bringing down their tyrants, and there is the threat of the Islamic movements."

Barak spoke of a "rising dimension of uncertainty", saying, "What is certain is that nothing is certain." He expressed the hope that, in the long term, democracy would rule in the Arab world, but that the current circumstances were dangerous. Firing a barb at Minister of Finance Yuval Steinitz, he said, "Public figures who believe that the risks to Israel have been reduced – I've heard some of them – are wrong."

Barak called the social protest "an important and exciting event, a protest by the backbone of Israeli society, which feels that its contract with the government and state has been violated and is no longer honored, that the solidarity that characterized us as a society for decades has gone." He said that the social protest was an opportunity for "a New Deal for the economy and society".

Central Bank to Lower Projection

The Bank of Israel will cut its growth prediction for 2012, probably from the current 3.2% to about the 2.9% predicted for Europe, Central Bank Governor Stanley Fischer told the Knesset Finance Committee in early December. Prof. Fischer, one of the world's most prestigious economists, said that Israel was likely to avoid a recession. The situation in Europe had improved slightly in terms of decision-making, he said, while warning that that "there will be a big mess" if countries quit the Eurozone.

"The Israeli economy is in good shape," said Fischer. "We have a lot more freedom of action than European countries and even the U.S., because of the positive things done by governments. If we act properly, we'll be able to successfully deal with the risks facing us. What is success? Avoiding a recession. But there is no doubt that what is happening around us will affect us, and we won't be able to grow as we once did."

Housing at High

78,000 homes were under construction at the end of September 2011, a ten-year high, the Central Bureau of Statistics reported.

Unemployment Low

Israeli unemployment amounted to only 5.6% in the third quarter, according to the Central Bureau of Statistics. Joblessness averaged 8.63% in 1992-2000, after peaking at a high of 11.4% in March 1992.

Record Month for Tourism

November 2011 was the best November ever for Israeli tourism, with 316,000 arrivals, the Central Bureau of Statistics says. The figure was up 2% from November 2010. About 3.1 million tourists entered Israel in the first 11 month of 2011, down 2% from January-November 2010.

El Al Profits Descend

El Al, the principal national air carrier, reported a 50% fall in profit for the third quarter of 2011, to $21M, down from $42.4M in the corresponding quarter of 2010. Revenue in the third quarter of 2011 rose 6% to $602M. El Al's operating expenditure, including jet fuel expenditure, rose 15% to $489M in the third quarter of 2011.

Ofer Family Dispute

The family of late billionaire Yuli Ofer, who died in September at the age of 87, is squabbling over the inheritance. At the heart of the dispute are Ofer's two wills, one dividing his estate equally between his son Doron and his daughter Leora, and the other making Leora the sole beneficiary of his estate – and in particular, his 37% share in Ofer Investments, the holding company of Yuli and his brother Sammy, who died earlier in the year. The late tycoon's third wife, Ruth, has subsequently joined in the contest over the inheritance.

Chinese Car Cooperation

A joint venture of the Israel Corporation, controlled by the Ofer family, and Chery Automobile Co. of China plans to begin sales of the first model of Qoros, a new made-in-China compact sedan, in Western Europe and China by 2013. As part of the cooperation, which started in 2007, a new factory with an annual output of 150,000 automobiles is going up in Changzhou, an industrial city near Shanghai.

Gas Reserves to Triple

Israel's potential gas discoveries may reach 1 trillion cubic meters, more than triple the current 300 billion, says Shuki Stern, director-general of the Israel Natural Gas Authority. Noting that current reserves are almost all in the Tamar offshore field, Stern said the figure will rise to 450 billion after production tests in the Leviathan field are complete, and that discovery of an additional 550 billion in Israel's territorial waters can be expected.

Turkish Trade

Trade with Turkey amounted to $2.8B in January-August, the Israel Export Institute said in October. As trade with Turkey continued to improve despite the shaky relations between the two countries, Turkey was Israel's seventh largest bilateral trading partner for the period.

Chinese Deal Completed

Koor Industries, of Israel's IDB Group, completed a deal to sell a 60% stake in its Makteshim-Agan Industries to ChemChina (China National Chemical Corp.). Makteshim-Agan is based in Lod, east of Tel Aviv. The agreement, which was the largest ever between the Chinese government and an Israeli company, gives Makhteshim access to low-cost production in China, while maintaining its European licenses and distribution agreements.

China-Israel Funds

Israel's Catalyst Investments and OneGate Capital of Shanghai, a private equity firm, have secured a $150M closing for China Israel Technology Fund, a joint venture to be based in Tel Aviv and Shanghai. The partners also plan another fund; both will enable Chinese companies to utilize Israeli technology and Israeli companies to access the Chinese market. The funds will specialize in cleantech, agritech, advanced manufacturing, advanced information technology and other areas of Israeli expertise. Yair Shamir, the former chairman of Israel Aerospace Industries (IAI) and El Al, the national air carrier, is Catalyst's managing partner.

Miki Arison Exits Hapoalim

Micky Arison, head of U.S.-based Carnival Cruise Lines and principal owner of the Miami Heat NBA basketball team, has severed his ties with Israel's Bank Hapoalim by selling his 23% in Arison Holdings Ltd., to his younger, Israel-based sister Shari. Arison Holdings owns 20.2% and control of Bank Hapoalim, one of Israel's two largest banks. The Israeli-American Arisons are heirs of the late billionaire Ted Arison, Carnival's founder.

Mergers & Acquisitions

Bank Leumi – Banque Safdie

Israel's Bank Leumi has completed its acquisition of Banque Safdie SA of Geneva. The purchase price was 143M Swiss francs ($156M), 20% less than the original price, due to a 40% decline in the assets of the Swiss bank. Banque Safdie will be merged into Bank Leumi Switzerland early next year.

CHS-Solbar

St. Paul, Minnesota-based CHS is acquiring Solbar Industries, an Israeli manufacturer of soy products, for $113M from its previous owners, including Kibbutz Hatzor (21.6%), Mivtach Shamir Holdings Ltd. (16.6%), and First Israel Mezzanine Investors (27.8%).

CHS is active in grain merchandising and transportation, sunflower and soybean processing, wholesale fertilizer, animal feed production and sale, and farm supply.

Alvarion-Wavion

Alvarion, the Israeli-rooted 4G networking specialist, will reportedly fire dozens of employees a week after the closing of its acquisition of Wavion, a WiFi developer based in Yokne'am near Haifa, for $30M. Alvarion has been trying to expand its business beyond WiMAX wireless broadband solutions, which have failed to take off, and Wavion gives it WiFi applications. Wavion had 70 employees before its takeover.

Permira UPS Netafim Holding

Permira, a private European fund, has increased its holding in Israel's Netafim by purchasing an additional 6.5% of the drip irrigation firm from Kibbutz Hatzerim for $50M. Last summer, Permira purchased 62% of Netafim from the Markstone investment fund, Tene and two kibbutzim, Yiftah and Magal, at a company value of $850M. Hatzerim, which at the time retained 38% of Netafim, now will hold a 32% share.

FDS-SciGen Israel

Britain's FDS Pharma, based in Surrey, has acquired SciGen Israel Ltd., a Rehovot plant manufacturing hepatitis vaccine, for $2M plus royalties. FDS Pharma owns patents to vaccines and produces active pharmaceutical ingredients (APIs) for the Russian and other markets, and is run by Russian executives.

Nice-Merced

NICE Systems, a worldwide provider of recording and digital management solutions based in Ra'anana, northeast of Tel Aviv, has acquired Merced Systems of Silicon Valley and London, for $150M. Merced's software specializes in service coaching, incentive management, performance analytics and other analytic solutions on an enterprise level.

DSP-Bonetone

The DSP Group, a wireless chipset solution provider based in San Jose, California, has acquired BoneTone Communications of Rosh Ha'ayin, in the high-tech belt northeast of Tel Aviv, for about $10M. Two years ago, the companies initiated a strategic partnership, in which DSP acquired a stake in the maker of innovative chip solutions improving voice intelligibility and audio quality for mobile devices.

Israel Chemicals-Nutrisi

Israel Chemicals, seeking to become one of the world's largest specialty chemical firms, has bought out its Chilean partner, Sociedad Qimica y Minera de Chile, in Belgian fertilizer components maker Nutrisi Holdings. Size of the deal was not disclosed. The two companies owned Nutrisi in equal shares. Nutrisi and Norway's Yara International ASA own in equal shares NU3, the world's largest manufacturer of soluble NPK (nitrogen), phosphorous, and potassium fertilizer components. NU3 sells its products in European global markets.

Arris-Bigband

Global broadband specialist the ARRIS Group, based in Suwanee, Georgia, has acquired BigBand Networks for $172M. Digital video specialist BigBand, founded in Israel in the early part of the 21st century, has corporate offices in Redwood City, California, and major facilities in Tel Aviv.

Newport-Ophir

Newport Corporation of Irvine, California, a global supplier of advanced technology products for the scientific research, aerospace and defense, microelectronics and precision manufacturing sectors, has completed the $230M acquisition of Jerusalem's Israel's Ophir Optronics. In the past, the Elul Group, which currently represents Newport in Israel, held 50% of the equity in Ophir, a maker of infrared optics for lasers and advanced measurement equipment.

Intel-Telmap

Chipmaker Intel has acquired Israeli navigation software maker Telmap for $300-$350M in October. Telmap offers location-based services to provide details on traffic data, speed cameras and local offerings; Intel, the world's No. 1 chipmaker, has two Fab manufacturing plants and four development centers in Israel.

Monsanto-Beelogics

Leading world chemical firm Monsanto has acquired Beeologics, a developer of targeted biological pest and disease control solutions for bees and bee colonies. Purchase price was not disclosed. Among the products of Beeologics, which is centered in Rehovot, south of Tel Aviv, but also has operations in Florida, is one that protects bee health by utilizing a naturally-occurring process. Monsanto intends to apply Beeologics core technology for its discovery and development pipeline.

RadVision Talks

Advanced acquisition talks are underway between Avaya PC, a privately held networking and communications firm headquartered in Basking Ridge, New Jersey, and Tel Aviv-based RadVision. The mooted purchase price is around $200M, according to a report in Globes.

RadVision, whose principal owners are brothers Zohar and Yehuda Zisapel, has had revenue problems since 2009 when Cisco, its largest customer, was acquired by Tandberg of Norway, the Israeli company's rival. The acquisition of Aethra of Italy in 2010 has enhanced RadVision's end-to-end conferencing capability, but failed to compensate for the loss of Cisco.

Apple's First Israeli Buy?

The Hebrew-language business press has reported advanced talks between Apple Inc., the computer giant, and flash-storage solutions developer Anobit for $400-$500M. Anobit, founded in 2007 and based in Herzliya, north of Tel Aviv, would be the first Israeli firm purchased by Apple.

Anobit's technology, which enables the storage of large quantities of data for enterprises and mobile customers, would be used to enhance the data-storage capabilities of Apple's signature iPad, iPhone and MacBook products. Apple might also use Anobit's staff and facilities as the base for its own R&D center in Israel.

According to Calcalist, the beneficiaries of the deal are Anobit's founders, president/CEO Prof. Ehud Weinstein, Ariel Meislos and Ophir Shalvi, the Israeli Pitango and American Battery funds, and the VC operations of Intel and Micron. (For Pitango a deal would be the second major exit in a month, after the fund sold Video Surf to Intel. Founders Weinstein and Shalvi sold Libit for $365M in 1999, and Meislos was a partner in Passave, sold for $305M five years ago.)

The deal, if it goes through, will be one of the biggest ever for Apple, which up to now has acquired no less than 33 companies, one of which, Next, was bought for as much as $700M.

In the last two years, Anobit has become a major supplier of flash-memory chips. In August, the company reported sales of $20M since the start of 2011.

Globes reports that Apple made the decision to set up a development center in Israel, the only one outside of its corporate headquarters in Cupertino, before and not regardless of the outcome of the Anobit acquisition talks. The paper says the company has already designated Israeli high-tech veteran Aharon Aharon to head the new center.

Finance & Investment

Romanian Pullout?

Tnuva Food Industries, Israel's dominant food company, is contemplating a close-down of Romanian operations, according to a report in Globes. Tnuva invested NIS 300M (about $80M) when it set up Tnuva Romanian Dairies in 2005, together with a European investment bank and a private partner.

Looking Good

eyeSight Mobile Technologies, based in Herzliya in the high-tech belt north of Tel Aviv, has raised $4.2M in a second round of financing including Ceva Inc and Mitsui & Co. eyeSight's Gesture Recognition Technology is used in touch-free interfaces for digital devices, including Apple's IPod and Ipad.

Imperva Breaks Nasfaq Barrier

Imperva, an Israeli company headquartered in Redwood Shores, California, raised $90M based on a company value of $190M in a NASDAQ initial public offering in November. It was the first successful NASDAQ offering for an Israeli company this year.

Imperva's software, designed to work across different systems in on-site and cloud data centers, protects against hackers and cuts the risk of business-data theft. The firm says its customers include four of the top five telecom firms, three of the top five commercial banks in the U.S., three of the top five financial data service firms, as well as government agencies around the world and more than 100 of the Fortune 1000 companies.

Klarna Raises $155M

Swedish-Israeli start-up Klarna has raised $155M in a new financing round. The firm, which provides e-commerce solutions in the Scandinavian countries, Germany and the Netherlands, got the funding from DST Global and General Atlantic; Sequoia Capital invested in the firm in 2010. It handles $2.5 billion-plus in transactions for 14,000 European merchants. Karna employs about 30 people in its Tel Aviv R&D center.

Super-Sol Deal Off

IDB Holding's deal to sell its controlling interest in the Super-Sol supermarket chain to a group led by Leo Noe, Matthew Bronfman and Shalom Fisher for NIS 2.4B (about $660M) was called off in mid-November. The transaction seems to have been killed, in part, by the prospect that restrictions proposed by the Trajtenberg Committee on reshaping the economy to restrict companies from holding major stakes in both financial and non-financial firms might have required the Bronfman family, one of Super-Sol's potential future owners, to sell an interest in Israel Discount Bank. Cancellation of the sale of Super-Sol, Israel's largest supermarket chain, was a blow to the liquidity problems of IDB's major shareholder, businessman Nochi Dankner.

Israel Corp. Buys Chilean Power Plant

The Israeli Corporation has acquired 75% of Central Tierra Amarilla, a Chilean power company. Price of the transaction for the Chilean company, which owns a 155MW power station north of Santiago and owes $60M to banks, was $15M.

The purchase was made through a Lima-based company owned by Israel Corp. subsidiary IC Power, which operates power stations producing a total of 3,000 MW in Peru, Bolivia, Chile, Panama, El Salvador, Jamaica, and the Dominican Republic.

Science & High Technology

Generic Lipitor

A U.S. subsidiary of Israel's Teva Pharmaceuticals and India's Ranbaxy Laboratories have agreed to share profits on Ranbaxy's sales of Atorvastatin Calcium Tablets (generic Lipitor) during Ranbaxy's 180-day first-to-file exclusivity period, will be paid to Teva. Terms were not disclosed. The U.S. Food and Drug Administration (FDA) has granted Ranbaxy exclusivity to market a generic version of Pfizer's cholesterol-fighting Lipitor, whose patent expired on November 30. The first six months are particularly important because profits will be high, prior to other drug makers entering the market with their versions of Lipitor and bringing prices down sharply.

Desalination Expands

Yuval Steinitz, the Minister of Finance and Minister of National Infrastructures Uzi Landau has signed an agreement for the franchise of a seawater desalination plant at Ashdod, south of Tel Aviv. The plant, to be operated by a subsidiary of the Mekorot national water company, will produce 100 million cubic meters of water a year, at a price of NIS 2.40 (about $0.67) per cubic meter.

The Ashdod plant, due to come on line in early 2013, will be Israel's fourth desalination plant using the state-of-the-art reverse osmosis system. Already operational are a 120-million cubic meter plant at Ashkelon and a 45-million cubic meter plant at Palmachim, both south of Tel Aviv, and a 127-million cubic meter plant at Hadera, between Tel Aviv and Haifa. Together, with another plant due to come online in 2013, the plants are due to produce 540 million cubic meters of water a year, 75% of Israel domestic water consumption, with capacity increasing to 750 million cubic meters of water a year by 2020.

Down with Sheet Music?

Sheet music may soon be obsolete, thanks to a new IPad app developed by Israeli start-up Tonara. The app, developed by CEO Yair Lavi and CTO Ivgeni Begelfort, can listen to tunes and display musical notes of what is being played, automatically turn pages. The free app comes with a limited number of classic recordings and the option to purchase others, which can be downloaded for $1 per song from a built-in app store. In an effort to appeal to young audiences, sheet music for songs by Beyonce and Lady Gaga will be available for $3-6.

Solar Investment

According to Globes, Noy Infrastructure Fund, whose investors include Poalim Capital Markets, Clal Insurance Enterprise Holdings, Menorah Mivtachim Holdings and DS Aprex Holdings, is about to sign an agreement to acquire 10% of a 4.9-megawatt photovoltaic solar energy farm owned by Arava Power Company and Kibbutz Ketura at a value of $20M. The electricity-generating farm has been hooked up to the national grid since August 30 and received a permanent power production license on October 11. Globes previously disclosed that Noy is discussing an investment in Arava Power-Ketura's projected $200M, 40-mWt PV field that could provide a third of Eilat's electricity.

IAI to Demonstrate Desalination Plant

Israel Aerospace Industries (IAI) plans to build a seawater desalination plant to demonstrate new technology it has developed, according to a report in Globes. Speaking at a conference in Jerusalem, IAI official Baruch Mevorach did not disclose details of the technology, other than to say that it was :"a new approach that is a more effective and economical."

Earlier this year, IAI said it was collaborating with a European company to develop, produce, and build innovative electricity-generating wind turbines. The companies decided to build two experimental wind farms at a cost of €43M.

Eli Hurvitz Dies

Eli Hurvitz, the former CEO and chairman of Teva Pharmaceutical Industries, died of cancer on November 21 at the age of 79. Hurvitz resigned as Teva's chairman two years ago, after serving as CEO for 35 years, turning it into the world's top maker of generic drugs. He was awarded the Israel Prize in 2002 for his contribution to the country.

High-Tech Hub

The British Embassy in Tel Aviv has opened a High-Tech Hub for Israeli companies, designed to promote lasting technology partnerships between the Britain and Israel. The Hub's staff will include experts in digital, cleantech, biotech and the Arab Israeli high-tech community.

Virgin Sale

Network management systems of Israel's Amdocs will be supplied to Virgin Media of the UK. Size of the deal was not disclosed, but reportedly is in the $10-$20M range. Virgin Media was Britain's first quad-play provider of broadband, TV, phone and mobile, and is the UK.'s only telecom provider with a nationwide fiber-optic next-generation network.

Columbian Deal?

Israel's Gilat Satellite Networks is a finalist in the tender to provide satellite communications services to the Columbian government, according to a report in Globes. The company already has extensive operations in Columbia and Peru, its South American neighbor, providing VSAT terminals for Internet and telephony connections in rural areas. Gilat's revenues in the two countries, where it has over 200 employees, amounted to $36M in 2010.

Nigerian Bridge Contract

Shikun u'Binui (Housing and Construction), a subsidiary of Bank Hapoalim controlling shareholder Shari Arison Holdings, has won a contract to build a $210M bridge over the Benue River in eastern Nigeria. In addition to the 2.1-km. four-lane span, the Israeli company will build 22 km. of access roads.

Aerospace & Defense

Elbit Seen Leading IMI Buyer

Private defense contractor Elbit Systems is seen as the leading candidate to purchase Israel Military Industries (IMI), according to a report in Ma'ariv. The privatization process, due to begin in mid-December with approval of a potential sale by the Knesset's Finance Committee, is expected to be an extended process.

Under the criteria set by the government, the Defense Ministry and the Government Companies Authority (GCA), the buyer must be Israeli, must pass a security check and must have a Certificate of Honesty. In addition, the GCA is expected to exclude government companies from bidding for IMI, which has a tentative value of about NIS 1B (just over $300M).

Key to the deal is likely to be a government write-off of an estimated NIS 1B it is owed by IMI, the Knesset Finance Committee was told in mid-December.

Flying Elephant

Elbit has been granted an Israel Defense Forces contract to develop Flying Elephant, a long-range power-propelled parachute that can carry supplies to troops behind enemy lines. The payload of catapult-launched, propeller-driven Flying Elephant will be one ton. Guided by GPS, it should be able to land within 30 meters of designated coordinates. Development of Flying Elephant began shortly after the 2006 Second Lebanon War.

Amos 5 Launched

Israel's Amos 5 communications satellite was launched on December 11 from Baikonur Cosmodrome in Kazakhstan. The satellite is expected to begin commercial operations early next year, after undergoing in-orbit testing. Spacecom, controlled by businessman Shaul Elovitz, has already signed several satellite communications service contracts for the Amos 5, including a $27.6M five-year deal with an African communications provider.

Choosing a Trainer

Israel will soon decide on a new jet trainer to replace the A4 Skyhawks currently used for that purpose. Candidates for the deal, for 25 to 35 planes at a total cost of about $1B, are Korean Aerospace Industries' T-50 Golden Eagle and the M-346, manufactured by Alenia Aermacchi of Italy. The planes will not be purchased directly by the IAF, but by Thor, a joint venture of government-owned IAI and private defense contractor Elbit, which will sell flying hours to the IAF.

Indian Purchase

India is purchasing two additional Phalcon AWACS airborne command-and-control systems from IAI, according to a November report in the Times of India. Israel sold India three Phalcon systems in 2004.

Elbit's Simulators

Elbit has introduced trainers for driving armored vehicles and to train forward observers at I/ITSCE 2011, a modeling, simulation and training conference held recently in Orlando, Florida.

One customer is the Israel Defense Forces, which like other armies is investing in simulators as a cost-cutting measure. According to the manufacturer, the armored driving trainer was designed to provide trainee drivers with a realistic driving experience under fire in combat conditions and can simulate stormy weather, poor visibility, off-road conditions, including mud and ice, and difficult terrain. The forward observer trainer simulates real-life battlefield situations for forward observers posted along all types of terrain, performing border control and protection. It is interoperable with C4I systems, including fire planning, ranging and field operation as well as target detection, recognition, identification, acquisition and engagement using day and night sensors.

Plasan's Sales Down

Sales at armored vehicle specialist Plasan, based in Kibbutz Sasa on Israel's northern border, have dipped, according to a report in Globes. A private company owned by the kibbutz, Plasan does not report profits or sales, but there have been reports of between 100 and 150 layoffs at the firm's factory. The decline is said to be cyclical, and to be due to falling demand brought about by the impending withdrawal of the U.S. military from Iraq, the thinning-out of the American presence in the Gulf and reduced defense budgets due to the global economic crisis.

Combat Training System Sale

An unnamed foreign customer has purchased the next-generation EHUD Autonomous Air Combat Maneuvering Instrumentation system from Israel Aerospace Industries, for $35M. IAI said that the system will provide a significant leap in performance to modern joint training capabilities for air, ground and naval forces.

Unmanned Superpower

Israel is a superpower in unmanned military systems, according to a report in Globes. Paving the way are Unmanned Aerial Vehicles (UAV), which Israel has deployed successfully for four decades (the IDF's UAV squadron recently marked its 40th anniversary) and has exported to countries around the world.

Born in the 1970s after the cancellation for financial reasons of the effort to build the Lavie, a made-in-Israel warplane, Israeli UAVs got their operational debut in Operation Peace for Galilee, the 1982 first Lebanon war. In recent years, UAVs have played an important operational as well as reconnaissance role in anti-terror operations over Lebanon and in the Gaza Strip.

Also in various advanced stages of development are Urban Aeronautics' Air Mule, an unmanned rotorless aircraft designed for use as a flying ambulance, in medivac rescue missions, and for use in tight urban environments where conventional helicopters have no access, and Picador of Aeronautics Ltd., whose primary mission will be naval intelligence.

Israeli prowess in unmanned systems is not restricted to aircraft: Genius, a joint venture of IAI and Elbit, produces the Guardium, an unmanned ground vehicle that has been successfully deployed on patrol missions along the Gaza border. At sea, Elbit's Silver Marlin unmanned surface vehicle is said to be capable of mine detection, search-and-rescue operations, and intelligence gathering on suspicious vessels. In addition, Elbit has developed the Stingray USV, which resembles a jet ski and can be used for protecting seaports, emergency management, damage assessment, and artillery practice against moving targets.

Iron Dome for Haifa?

A battery of Israel's Iron Dome missile defense system may be permanently deployed in Haifa Bay to protect the oil refineries there, Home Front Defense Minister Matan Vilna'i has suggested. After a meeting with Oil Refineries CEO Pinhas Buchris, a former director-general of the Defense Ministry, Vilna'i said the refineries "are crucial to the continued functioning of Israel's economy in times of crisis." He made the statement a few hours after Sheikh Hassan Nasrallah, the Hizballah leader, said his organization was capable of attacking "way beyond Haifa."

Three batteries of the Iron Dome system, developed by Rafael, have been deployed in southern Israel, in areas under threat from short-range rockets fired from the Gaza Strip.

Tammuz Accuracy Upgraded

A few months after it was unveiled, Israel's Tammuz anti-tank missile has been upgraded to enhance its accuracy. The new system includes a dot that is fixed on the target, and viewed by the launch crew via a special camera on the missile, allowing soldiers to follow the missile from the moment of launch all the way to impact.

The system, due to be deployed in the near future, improves the accuracy of missiles, allows for in-flight course corrections and improves the ability to avoid collateral damage and injury to innocent civilians.

In a parallel development, the Artillery Corps, under the command of Brig.-Gen. David Suissa, is preparing to absorb a new system that will enable the firing of advanced rockets still in the development stage.

Griffin Chosen

Switzerland has selected the Swiss Griffin aircraft to replace its F-5 warplanes. Also participating in the deal for 22 Griffins to replace 41 F-5 warplanes and 12 trainers, are the French subsidiary of Israel's Rafael and Eurofighter.

Dolphin Sub

The German government has approved the subsidized sale of a Dolphin-type submarine to Israel. Germany will allocate $180M, about a third of the cost of the vessel, which will be the Israel Navy's fourth Dolphin.

DHL Deal Due

IAI and international cargo firm DHL are in the final stages of negotiations on a $55M deal for the reconfiguration of five Boeing 767 airliners from passenger to cargo. Calcalist quoted DHL Express Israel manager Ori Sharon as saying that the contract was part of DHL's overall strategy of adapting its fleet, currently amounting to 260 aircraft, to long-range assignments in order to "shorten delivery time to intercontinental clients."

Third-quarter results of government-owned IAI, published in late November, show a 88% fall in profits from $25M to $3M, largely attributable to $45M in financing costs.

Naval Recon Plane

IAI's Elta subsidiary will market naval reconnaissance aircraft in collaboration with Canada's Bombardier, according to a report in Ma'ariv. The aircraft, based on Bombardier's Q400 twin-turboprop civilian aircraft, are expected to sell for $200-$250M, 20-30% lower than comparative aircraft on military platforms.

The maritime patrol, anti-submarine warfare and search-and-rescue-configuration aircraft is being offered by Elta/Bombardier in cooperation with Canada's Field Aviation. It include Elta's EL/M-2022 maritime surveillance radar, optical payload and signals intelligence-gathering equipment.

Elbit Contracts

Elbit has won an $11M contract to supply its Lightweight Weapons Stations (LWS) for armored vehicles to the Israel Defense Forces, and a $10M for an unnamed European army. Elbit will develop and mount 7.62mm, 12.7mm and 40mm LWS on armored personnel carriers (APCs) and other IDF armored fighting vehicles over an 18-month period. It will also supply a 12.7mm LWS to be mounted on the European army's Pandur 6x6 armored cars over a 12-month period.

Meanwhile Elbit Systems of America, an Elbit subsidiary, has bought out the stake of its partner General Dynamics in UAS Dynamics, the two defense contractors' joint unmanned aerial vehicle (UAV) venture. UAS will become part of Elbit of America's Unmanned Systems business unit, responsible for both airborne and seaborne unmanned systems. Size of the deal was not disclosed.

New IAI Subsidiary in the US

IAI plans to set up Elta North America, a subsidiary to market electronic defense products of its Ashdod-based Elta Systems in the Western Hemisphere. Elta North America will resemble Mississippi-based Stark Aerospace, established by IAI five years ago to manufacture and market IAI unmanned aerial vehicles for the Americas market.

Eyes in the Sky

A new ground reconnaissance aircraft has been developed by Elta, based on Gulfstream-IAI G-280 executive aircraft and Elta's JSTARS sensor system. The configuration employs JSTARS because the G-280 is too small to accommodate AEW or SIGINT systems.

Avishai Yitzhakian, deputy GM of Elta's airborne division, says that the system is ideally suited for use with ground forces in places like Afghanistan, where it is an "ideal platform" for providing ground commanders with real-time information. He said that JSTARS, which has also been mounted on smaller aircraft platforms, AEW and SIGINT, comprise a growing market that is one of Elta's major growth engines.

Elbit Part of KC-390

AEL, the Brazilian subsidiary of Elbit, has signed a $25M deal to provide Brazilian aerospace firm Embraer with three systems for the KC-390 transport-tanker aircraft. The systems are the Self-Protection Suite (SPS), the Directed Infrared Countermeasures (DIRCM) anti-missile defense, and the Head-Up Display pilot orientation system.

Embraer is developing the KC-390 for the Brazilian Air Force; first deliveries are due in 2015.

Sweet Music for Airliners

Amid reports that as many as 20,000 shoulder-launched anti-aircraft missiles were missing in Libya and suspicions that some of them may have made their way into the hands of terrorists in the Sinai, Elbit's subsidiary El-Op gave journalists a look at its airliner-protection system, C-Music. El-Op officials noted that the system, now in its final stages of development, uses DIRCM, a directional infrared countermeasures system which diverts incoming missiles from aircraft rather than intercepting and exploding them.

Elbit, El-Op's parent company, recently won a $280M Defense Ministry contract to upgrade Israel Defense Forces communications.