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Israel’s Rafael and Aeronautics sign agreement to develop and manufacture advanced drones

The five-year agreement involves joint marketing and sales of UAVs, first in Israel and then later expanding overseas

Israeli company Aeronautics Ltd. announced this week that it had signed a cooperation agreement with Rafael Advanced Defense Systems Ltd. and the two will work together to develop and manufacture advanced drones based on the Orbiter family of small, tactical unmanned aerial vehicles.

The five-year agreement signed on Wednesday, January 2 involves joint marketing and sales of the systems, first in Israel and then later expanding overseas. In the event that the Aeronautics ownership structure changes, Rafael has the right to cancel the agreement.

Rafael, the largest employer in northern Israel, had a record high $2.2 billion in sales in 2017. The company develops and manufactures advanced defense systems for the Israel Defense Forces and exports around the world. Approximately 46 percent of Rafael’s sales are intended for Asia, Europe, North America and South America, according to the company.

The announcement comes after Rafael, working with a businessman named Avichai Stolero, failed to acquire Aeronautics in August. Aeronautics rejected the proposed NIS 430 million ($115 million) buyout due to its low offering price.

The current chair of Aeronautics, Yedidia Yaari, is also the former CEO of Rafael. On August 29, Israeli business website Globes reported that 10 senior Aeronautics executives headed by CEO Amos Mathan, will be indicted for aggravated fraud and subjected to a hearing at the economic unit in the Israeli State Attorney’s Office for violations of the Defense Export Control Law.

The court imposed a gag order in the case of the 10 executives, but the investigation focused on a deal between Aeronautics and an “important” customer overseas, Globes reported in August.

The investigation was led by a joint team of the Israeli police National Serious and International Crimes Unit and the Director of Security of the Defense Establishment’s investigative unit. The Defense Export Control Law is designed to protect Israel’s diplomatic and defense ties against unauthorized export of defense products.

Rafael and Aeronautics already cooperate on several other ventures and jointly own Israel-based Controp, which produces surveillance systems including thermal imaging cameras and electro optical infrared payloads. Aeronautics reported to the Tel Aviv Stock Exchange that the new agreement constitutes an extension of an existing deal signed in 2015.

Aeronautics also announced on January 1 that they were in preliminary talks with Israel Aerospace Industries for an investment into Aeronautics. Globes reported that the talks are considered initially non-binding. Aeronautics added that it was negotiating with another party for the sale of its holdings in Controp.

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