News Analysis – September 2017

General News Summary

Promises, Promises

Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu both expressed a willingness to cooperate with stalled U.S. peace efforts, after weeks in which both sides seemed to have stiffened their stances on renewal of serious negotiations. The apparent change in attitude came during a late-August visit to the region by Jared Kushner, President Trump’s designated point man in the Israeli-Palestinian dispute. At about the same time, both U.N. Secretary General Antonio Guterres and Jason Greenblatt, President Trump’s special envoy to the region, were in Israel and the Palestinian Authority.

The statements, made after Kushner met Abbas in Ramallah and Netanyahu in Tel Aviv, may have surprised Kushner, who recently was quoted as telling an off-the-record meeting with Congressional interns in Washington that the Israeli-Palestinian conflict may be insoluble.

Kushner, President Trump’s son-in-law, was less than forthcoming in public. Perhaps pointedly, he made no mention of the U.S. position on a two-state solution, endorsement of which Abbas reportedly sought before the meeting. (A few days earlier, a State Department spokesperson said that doing so would be prejudicial to the U.S.’s status as an intermediary.)

In the aftermath of the visit, observers were looking for any sign of a change by either side. For example, Palestinian moves to unilaterally declare statehood on the one hand or dissolve the Palestinian Authority established in the 1993 Oslo Agreements on the other would indicate that no progress had been made, while renewal of security cooperation suspended by the PA after July’s violence on Jerusalem’s Temple Mount might be taken as a positive sign. For his part Netanyahu might refrain, at the very least, from repeating recent statements of absolute opposition to any Israeli withdrawal on the West Bank and to the establishment of a Palestinian state, the latter in direct contradiction of his 2009 speech at Bar-Ilan University in which he supported creating a demilitarized Palestinian state. Hopes that he would do so seemed ill-placed a few days after Kushner had departed and was back in Washington, when Netanyahu told Likud party loyalists that Israel would never withdraw from settlements, as it did in the 2005 “disengagement” from the Gaza Strip.

That statement expresses the problem Netanyahu faces. Although he publicly expresses willingness to cooperate with Kushner, doing so is bad domestic politics. On the one hand, moving ahead with significant negotiations would erode the support of his domestic political base, support he sorely needed in the midst of multiple criminal investigations involving him (See The Netanyahu Files, below) and his wife. On the other hand, outright refusal to do so runs the risk of enraging President Trump and eroding U.S. political support.

Syrian Danger

Iran and its proxies are rushing into Syria to fill the void created when ISIS has been pushed out, which Israeli officials say poses new dangers not only to Israel but the region and the world as well. That was the point emphasized by both Prime Minister Netanyahu and Yossi Cohen, head of the Mossad intelligence service, in late-August meetings with Russian President Vladimir Putin in Sochi, the resort city on the Black Sea.

A similar point was made in a meeting with American officials, in which the Israelis said that Teheran is attempting to build a land corridor through Iraq and Syria to Hizballah, its Shi’ite Muslim ally and surrogate in Lebanon.

Only recently has Israel acknowledged that it was responsible for airstrikes against Syrian convoys carrying “game-changing” armaments and arms systems to Hizballah. (According to foreign reports, these weapons include mobile rocket launchers and modern anti-aircraft missile systems,) In early summer, Netanyahu put the number at “dozens.”

The latest strike apparently came in early September. According to foreign press reports,which were confirmed by statements from the Syrian military, four Israeli warplanes bombed a plant manufacturing chemical weapons near the city of Masayf in central Syria. Amos Yadlin, the reserve general who formerly headed Israel’s Military Intelligence, said after the attack that the operation was “not routine.” Yadlin said that the plant produces explosive barrels and chemical weapons that have killed thousands of Syrian civilians,” calling the strike “an Israeli moral statement about the massacre in Syria.”

In mid-August, outgoing Israel Air Force commander Maj.-Gen. Amir Eshel was more specific, indicating that the number was nearly 100 over the past five years, many of them “under the radar” in terms of publicity. In an interview published in Haaretz, Eshel also said that he thought “our actions reduced the possibility of war. We didn’t eliminate it, it doesn’t mean that there won’t be some miscalculation tomorrow – anything is possible. But when someone feels you know more about them and when you’re determined to act, even when it looks impossible, and you act sharply and precisely, that doesn’t generate a desire for wars.”

The Netanyahu Files

Prime Minister Benjamin Netanyahu continues to maintain that several police investigations centering on him and his associates will end up being dropped, because as he repeatedly says “there’s nothing there.” Nevertheless, even as the prime minister’s supporters organize campaign-style rallies to demonstrate popular support for him, pressure appears to be mounting on Netanyahu on three major fronts, described by the police as Cases 1000, 2000 and 3000, and a separate case involving the prime minister’s wife Sara. Sara Netanyahu is to be indicted for fraud for ordering food costing about $100,000 from caterers for the Prime Minister’s Residence while falsely claiming that the residence did not have a cook. The Netanyahus have claimed that a former employee of the residence had inflated the state facility’s expenses. At the same time, Attorney General Avichai Mendelblitt said that three other cases involving Mrs. Netanyahu, all centering around unauthorized expenses, would be closed.

No recommendations have been made in the other three cases. According to published reports, the Israel Police is expected to make a decision in Case 1000, centering on unauthorized gifts to Netanyahu and his family from wealthy patrons, including Israeli film producer Arnon Milchan (pink champagne and cigars) and a series of costly gifts, plus hospitality for the Netanyahus’ 25-year-old son Yair from Australian billionaire James Packer. The Netanyahus claim that nothing was illegal, that these were simply presents from friends.

Farther down the line, police still have not determined what to do, if anything, about Case 2000, centering on conversations between Netanyahu and Arnon (Noni) Mozes about getting favorable coverage in Mozes’s Yediot Aharonot newspaper in exchange for cutback in the commercial activity of the rival Israel Today free paper owned by U.S. casino mogul Sheldon Adelson. Recordings of the conversations were discovered during a police investigation of Ari Harow in another case. Still not determined is whether the conversations themselves constituted a criminal offense since no deal was made; police reportedly are examining the implications of Harow, who has become a state witness in exchange for immunity from prosecution.

Case 3000 concerns the purchase of three submarines from ThyssenKrupp of Germany, in which Netanyahu has so far not been implicated. A number of high-ranking former officials have been called in to testify in the case, including former Israel Navy chief Eliezer Marom, former deputy national security head Avriel Bar-Yosef, and aides to Yuval Steinitz, at the time Strategic Planning minister. Steinitz, now National Infrastructures minister, was also expected to testify. The key (state’s) witness in the case is Michael Ganor, who formerly represented the German shipyard in Israel. Ganor’s lawyer, David Shimron, is a relative of Netanyahu and a close friend whose law partner Yitzhak Molcho frequently acted as an emissary for Netanyahu on diplomatic missions. Both Netanyahu and Shimron say that the prime minister was unaware that Shimron was representing Ganor – and stood to collect extremely large fees – for representing Ganor. The complicated nature of the case, in which new witnesses continue to be called in, makes prospects for a speedy decision on possible criminal responsibility remote indeed.

Rail Record

May’s average of 299,000 passengers per day set a new record for Israel Railways, as was the 31.5 million passengers who traveled by train in the first half of 2017. The government-owned railroad reported that a train had successfully completed the first test run on the new line to Jerusalem, due to open next April. The line, on which construction began in 2001, will cut travel time on the Tel Aviv-Jerusalem route to 28 minutes, about half the time of road transportation and far faster than trains on the existing route on the right-of-day that dates back to the British Mandate.

The Economy

Teva’s Troubles

The fortunes of Teva Pharmaceuticals, long considered Israel’s strongest company whose shares were the cornerstone of conservative Israeli investment, continue to decline. The company, which has its base in Petah Tikva and Jerusalem and subsidiaries around the world, has suffered a drop both in current earnings and projected future earnings, large-scale layoffs, inability to keep a CEO (it’s had three in the past few years), worker unrest and delayed product launches, plummeting credit ratings and cash-flow problems, just to name a few. Much of the difficulty stems from two main sources: expiration of the patents on Copaxone, the $1M-a-year-plus blockbuster multiple sclerosis treatment, which it introduced back in 1996 and the massive debt build up by its hyper-aggressive acquisitions policy, including last year’s purchase of Allergan’s generics division for a whopping $40M. It’s still not clear how much retrenchment will be needed to cure the company, which over the last 20-odd years morphed from an Israeli pharma that was small on the world scale into the global biggest producer and marketer of generic pharmaceuticals. Industry analysts suggest that Teva has enough inherent strength to survive the crisis, particularly if it finally fills the vacant CEO and CFO posts that have been filled with interim appointees for most of 2017.

FC Reserves Set Record

Israel’s foreign exchange reserves rose to a record $110-111M at the end of July 2017, up $1.405M from their level at the end of the previous month, according to a Bank of Israel report. Reserves now represent 33.8% of Gross Domestic Product.

S&P Raises Outlook

International credit rating agency S&P is changing its rating outlook for Israel from neutral to positive. The change means that an upgrade in Israel’s credit rating is possible in 6-24 months.

Growth Equals 2.7%

Israel’s Gross Domestic Product grew at an annualized 2.7% in the second quarter of 2017, the Central Bureau of Statistics reported. Growth was just 0.6% in the first quarter. Growth rate for the first half of the year amounted to 2.1%, well below the over 4% figure for the first half of the preceding year.

Unemployment Down

Israel’s unemployment rate in July was 4.1%, down from 4.3% in June, the Central Bureau of Statistics reported.

Gas Revenues Rise

The Israeli government collected NIS 403M in natural gas, oil and quarrying royalties totaling NIS 403M in the first half of 2017. Most of the income, NIS 390M, came from the offshore Tamar gas field. In all, 4.8 billion cubic meters (BCM) of natural gas was extracted in the first half of 2017 compared with NIS 4.5 BCM in the first half of 2016.

Exports Up

Israeli exports totaled $50B in the first six months of 2017, up 6% from the first half of 2016. In all, the Israel Export and International Cooperation Institute said that exports of goods were up 4% to $9M, while exports of services rose 8% to $21M. Economy and Industry Minister Eli Cohen expressed confidence about meeting the goal, $100M in exports for all of 2017.

Infrastructure Plan Approved

Israel’s cabinet has approved an NIS 116B ($32.4B) infrastructure development plan for 2017-21. The plan involves 147 projects, most of them in transportation and energy; many of the specific plans were announced and budgeted, others require private sector financing. One advantage of the plan is that they all now will be monitored by the same body.

India Energy Cooperation

A group of senior Indian officials recently visited Israel as guests of the Energy Ministry. The delegation, initiated after Energy Minister Yuval Steinitz’s July meeting with his Indian counterpart, explored possible energy cooperation between the two nations, including the possibility that Indian energy companies would participate in offshore natural gas exploration in the Mediterranean.

Cofix to Turkey

Cofix, the Israeli cut-price coffee chain, continues its international expansion. The chain, which sells coffee and all other items for a uniform NIS 6 price, informed the Tel Aviv Stock Exchange that it was opening franchise deals in Turkey, a few months ago, it launched its first venture outside Israel, in Russia.

Potash Sales

Israel Chemicals has signed contracts to supply clients in India with 750 tons of potash for a total price of $180M. The contracts follow similar deals with Indian clients in 2016, and make Israel one of the subcontinent’s largest suppliers. About two weeks before the August sale, ICL signed similar contracts to supply 925 tons for $225M with China.

Decathlon Opens in Israel

Decathlon of France, one of Europe and the world’s largest sporting goods retailers, has opened its first Israeli store in a shopping center in Rishon Lezion south of Tel Aviv. Decathlon currently has 1,221 stores in 32 countries.

Finance & Investment

Bird Investment

The U.S.-Israel Binational Research and Development Foundation (BIRD) is investing $2.75M in three first responded projects to be developed jointly by U.S. and Israeli companies. The paired companies are Beeper Communications of Ramat Gan and Mantaro Networks of Maryland, for an unmanned search-and-rescue system; Israel’s Elbit Systems Land and M87 of Belleview, Washington, for advanced communications systems; and Similat of Petah Tikva with Sinclair Community College of Dayton, Ohio, for autonomous UAV-based autonomous search and rescue. Over its 40-year history, BIRD has financed more than 900 Israeli-U.S. companies joint projects.

Tahal’s Zambia Deal

Tahal, the Israeli developer of sustainable infrastructure projects, and the government of Zambia have agreed on construction of a 14,000-acre agricultural and water development project in the African nation. The deal, in which Tahal is partnered by the local ZRB firm, has an estimated worth of $175M. The contract seems likely to add to the value of Tahal, which Kardan NV, its current owner, has been trying to sell. (Kardan is headquartered in Amsterdam, and is listed on both the Amsterdam and Tel Aviv stock exchanges.

Leumi Probe

Attorney General Avihai Mendelblitt has initiated a criminal investigation of three former Bank Leumi executives’ possible role in helping customers of the bank’s U.S. branch evade taxes. The investigation involves Galia Maor, the bank’s former CEO, former chairman Eitan Raff and Zvi Itzkovich, former chairman of the bank’s International Division. According to press reports, current bank executives and the bank itself are not involved in the alleged offenses.

Subsidies Boost Eilat Tourism

More than 150,000 foreign tourists are expected to pass through Israel’s Uvda Airport, located in the southern part of the country not far from the resort city of Eilat, ending a three-year decline following the 2014 Operation Protective Edge in Gaza. Press reports attribute the increased traffic to a new subsidy program for airlines bringing tourists to Uvda and Eilat – subsidies to airlines of $53-per-passenger from the Tourism Ministry and $15 from the Eilat Hotel Association during the winter tourist season. Low-cost airlines’ response is obvious – Ryanair has scheduled 28 flights a week to Eilat/Uvda, and Wizz Air has increased its weekly schedule from two flights to seven.

Foreign Companies

Foreign companies’ investment in Israel amounted to $12.8M in 2016, up 7% from the previous year, Ministry of Economy figures show. In all, 320 multinationals operate in Israel.

Mergers & Acquisitions

Mexichem Buys Netafim Stake

Permira, the London-based investment fund, is selling its 61% share of Israeli drip irrigation specialist Netafim to Mexichem for $1.5M. At the same time, Kibbutz Magal, one of the three kibbutzim where Netafim was founded in 1965, is selling its remaining 6% share in the company. Kibbutz Hatzerim, another of the founding trio, reportedly is retaining a 20% equity in the company, which developed and remains a world leader in drip irrigation technology. Total valuation of the deal is about $1.9M. Mexichem is a world leader in the plastics and chemicals industries. Nevatim now has 16 production plants, including three in Israel, about 4,000 employees worldwide and operations in 110 countries. Permira nearly doubled its investment after purchasing its stake in Netafim for $850M in 2011.

Gilead Sciences-Kite Pharma

Research-based pharmaceutical company Gilead Sciences of Foster City, California is paying $11.9M in cash for Kite Pharma, a company that has deep Israeli connections even though it’s formally based in Southern California. Kite, which develops technology that custom-makes cancer treatment by reprogramming the affected patient’s own cells, was founded by Prof. Arie Belldegrun, an Israeli graduate of the Weizmann Institute and Hebrew University, who moved to the Los Angeles area decades ago. The company’s technology is based on discoveries by Weizmann Institute scientist Prof. Zelig Eshhar, rights of which were purchased by Belldegrun. According to press reports axi-cel, the Kite drug based on that technology, is in the midst of approval processes in both Europe and the U.S. and – pending approval, of course – has blockbuster-level anticipated sales of at least $1.7M worldwide in 2022.

Kite’s biggest shareholder is the U.S fund Capital Group, which holds 19.9% of the company, followed by Rowe Price Group with 9%. The biggest Israeli stockholder is Menorah Insurance, whose 2% stake is worth $222M and Migdal Insurance Group with a $26M holding. Eshhar and the Weizmann Institute will receive royalties when commercial sales of axi-cel begin.

GE Digital-IQP

GE Digital has acquired IQP, a Japanese-Israeli start-up specializing in Internet of Things programming technology. No purchase price was announced, but Globes business daily, quoting market sources, estimated it at $30-40M. IQP has headquarters in Tokyo, offices in Pablo Alto, California, and a research center in Herzliya, north of Tel Aviv. The company, founded in 2011 by Israeli Guy Kaplinsky and his wife Maki, who is Japanese, lists Toyota, Fujitsu and Motorola as among its customers.

LogMeIn-Nanorep

LogMeIn, a U.S.-based SaaS (Software as a Service) company, has purchased Israel’s Nanorep for $45M. Headquartered in Herzliya, Nanorep uses patented artificial intelligence and natural language-processing technology to enhance self-service customer experience. Its 200 customers include FedEx, ToysRUs, IKEA and the Royal Bank of Scotland.

Ferro-Dip Tech

Fortissimo Holdings, a private equity firm headquartered in Rosh Ha’ayin northeast of Tel Aviv, has sold its holdings in Israeli firm Dip Tech to Ferro Holdings of Cleveland, Ohio for $64M as part of an $80M sale of the Israeli firm. The sale represents a 400% return on Fortissiomo’s investment, made four years ago.

Located in Kfar Saba, in the high-tech belt north of Tel Aviv, Dip Tech develops digital printers and ceramic ink for the glass industry, facilitating printing on building facades and glass walls. Ferro, is an international provider of functional coatings and inks.

EMK Buys Luminati Control

EMK, a British private equity firm, has signed an agreement to purchase a large majority stake in Israel’s Luminati at a company value of $200M. Luminati, based in Netanya north of Tel Aviv, is the enterprise proxy network division of Israel’s Hola Networks.

Aristocrat-Plarium

Aristocrat Leisure of Australia has acquired Plarium Global, an Israeli social gaming developer based in Herzliya north of Tel Aviv, for $500M in a cash transaction. Vikings: War of Clans, Plarium’s has over 1,200 employees worldwide and offices in the U.S. and Europe; its most popular game has been rated as one of the top 10 games in cash flow.

SK Capital-Chemagis

Perrigo reportedly has agreed to sell Chemagis, its Israeli active chemical ingredient manufacturer, to U.S. private investment firm SK Capital for $110M. Perrigo acquired the Israeli firm in 2008, as part of an $818M purchase of Agis, an Israeli pharmaceutical manufacturer.

Frutarom Keeps On Buying

Frutarom, the Israeli maker of flavorings and other raw materials for the global food industry, continues its active acquisition policy. It recently purchased Enzymotech, an Israeli developer of food additives. After paying $24M for just short of 10% of Enzymotech from a hedge fund controlled by billionaire John Paulson, Frutarom holds 19.1% of the company and says it will publish an offer to buy the remaining equity at $11.50 per share.

Frutarom also purchased Flavours and Essences of the UK for $19.5M. The British company was Frutarom’s fifth acquisition in 2017, (following Unique Flavors of South Africa, France’s Rene Laurent, WFF of Vietnam and SDFLC of Brazil) and the 24th since 2015.

In early September, Frutarom reported its 7th acquisition of 2017: Israel’s Turpaz Flavor and Extracts Ltd., of Holon just outside Tel Aviv, for $15M.

Havas-Blink

Havas, the international advertising agency headquartered in New York, has purchase Israel’s Blink for an undisclosed sum. Blink, a specialist in advertising on social networks, was founded by Sagi Chemetz, a pioneer in Israeli digital publicity.

FIMI-Orbit

FIMI, the private equity fund headed by Israeli Yishay Davidi, has purchased Orbit, an Israeli provider of communications systems, for a reported NIS 108M. Orbit, based in Netanya north of Tel Aviv, specializes in communications for land, sea, air, space and homeland security applications.

Vista-Applause

Vista Equity Partners of San Francisco has acquired Applause, an Israeli digital testing specialist, for an estimated hundreds of millions of dollars. The Herzliya-based Israeli company, which in the past has raised about $115M, has a client list that includes Uber, Michael Kors, Google and Fox.

Signet Jewelers-R2Net

R2Net, the Israeli start-up which operates the popular James Allen diamond-trading website, has been sold to Signet Jewelers, based in Bermuda, for $328M. R2Net, with offices in Herzliya, was founded in 2006 and is now one of the world’s largest online jewelry marketplaces, holding no stock but acting as an intermediary and forum between retailers and wholesalers.

Gett-Streetsmart

Gett, which operates taxi-hailing services in over 100 cities around the world, has acquired Streetsmart, developer of a taxi and car service fleet-managing system. Purchase price was not disclosed, but reportedly is in a few millions of dollars. Streetsmart, headquartered in Tel Aviv, was founded in 2015.

Nielsen-VBrand

Nielsen, the New York-based global ratings and performance-management giant, has acquired VBrand, a Tel Aviv developer of artificial intelligence program for sports marketing. Purchase price was not disclosed.

Science & High Technology

Drug Testing Breakthrough?

A scientist at the Hebrew University of Jerusalem has created a radical new technology which seems likely to cut both the time and cost of drug development. Tissue Dynamics, the company founded by Prof. Yaakov Nahmias, who specializes in bioengineering, developed chips which can replicate the reaction of human organs to drug candidates, predicting toxic reactions that conventional drug developers are unable to foresee. Using his liver-on-a-chip, Nahmias was the first scientist able to explain the failure, in the early 2000s, of troglitazone, a promising type-2 diabetes treatment, due to unexpected toxic reactions during clinical trials. Since its founding last year, Tissue Dynamics has been working with both drug and cosmetic developers, including L’Oreal. In addition to the liver chip, the firm is working on heart and brain chips. Success of the chips, if they prove effective, is likely to reduce the need for testing new drugs on animals and shorten the lengthy testing period preceding regulatory approval of new pharmaceuticals.

Smart Car Developments

Renault-Nissan, winner of an Innovation Authority tender for new business developments, will open an incubator specializing in smart car and shared transport technologies at Kiryat Atidim in northern Tel Aviv. Companies selected for the incubator will receive up to NIS 1M in government funding. Renault-Nissan joins other automakers with Israeli R&D facilities, a list that includes GM, Daimler, Honda, Volvo and SAIC.

In separate developments, Oryx Vision, a start-up developing light-sensing technology for depth perception in self-driving cars, has raised $50M in a Series B funding round. The company, based in Petah Tikva just outside Tel Aviv, expects to ship units for car-mounted testing by next year. And Intel announced completion of the first stage of its $15.3M acquisition of Mobileye, the Jerusalem developer of sensor-camera auto safety technology, saying that it plans to begin building a fleet of 100 fully-autonomous cars for testing in the U.S., Israel and Europe.

Mobileye has been the center of controversy over possible insider trading prior to its sale to Intel. The U.S. Securities and Exchange Commission is investigating suspicions that company founder Prof. Amnon Shashua and founding partner Zvi Aviram were involved in insider trading by two U.S. citizens prior to the sale to Intel, and Shashua is involved in a royalties dispute with the Hebrew University of Jerusalem, where he was a computer science professor. In a statement, Mobileye denied ever using any Hebrew University intellectual property in developing its camera-based auto safety technology.

Tower Accuses

In another development, Tower Semiconductors of Migdal Haemek near Haifa (traded as TowerJazz) says its technology was used in development of rear and side radar sensors by Denso Corp., a supplier of advanced technology components to automakers, in the safety system of Toyota Camry models released in the U.S. this summer. Tower and Tacoma of Nanjing, China, are also building an 8-mm fab for semiconductors in the Chinese city.

Innovis Tech

Two of the world’s largest makers of auto parts, Magna of Canada and Delphi Automotive of the U.K., have joined the latest financing round of Innoviz Technology, a Kfar Saba-based developer of car sensors. Amount of either investment was not disclosed.

Innovation Labs

Israel’s Innovation Authority has selected five operators of government-backed Technical Innovation Laboratories. The labs will operate for three years, giving potential entrepreneurs resources to establish proof of concept. The five franchise holders are Ham-Let Israel-Canada Ltd., which will run an Internet of Things development facility at the Zipori Industrial Area, in northern Israel; Israeli companies Shikun & Binui and Solel Boneh, plus ENEL of Italy, for a construction, transport and energy lab in the Haifa area; ASI Automotive Service Israel, a mobility-transport lab at Kiryat Atidim in Tel Aviv; Merck Performance Materials and Flex, for next-generation electronics in Yavne, south of Tel Aviv; and Fruatrom, for developing unique inputs for the food and beverage industries at a Haifa tech lab.

Oracle Chooses 5 for Accelerator Project

Oracle, the global software giant, has selected five Israeli start-ups to participate in its initial Israel cloud accelerator project. The six are 3DSignals, developer of a system that analyzes the sound of machines and predicts when they are about to malfunction; global networking specialist Nsof Networks; Bonobo, an artificial intelligence system for analyzing text and conversation data; Zoomin, dealing with customer interaction to product documentation; and audio-visual smart guidance platform Toonimo. The five were selected from hundreds of applicants.

Electric Road Trial

Israel’s Transport Ministry, the Tel Aviv Municipality and electric-road developer ElectRoad are sharing the cost of a pilot 800-meter stretch of roadway equipped for recharging electric-powered buses and vehicles. If the project succeeds, the ministry says it plans to deploy the technology along 18 km of highway between the southern resort city of Eilat and the Ramon Airport. ElectRoad, which is based in Caesarea between Tel Aviv and Haifa, envisions eventual electrification of much of the urban transportation infrastructure.

Qoros China Pacts

Qoros, the automotive joint venture between Israeli billionaire Idan Ofer’s Kenon Holdings and Chery, the Chinese automaker, signed cooperation agreements with four Chinese partners in early August. The partners include Beijing’s power company, media-communications firm Tencent, and PICC, a financial firm. The partners ordered 30,000 Qoros vehicles, to be supplied to institutional customers over the next two years.

Tech Purchase Rules

The Finance Ministry has proposed a change in regulation which would allow government companies and their subsidiaries to buy shares and options in technology companies in spheres without obtaining government approval. The plan also establishes an abbreviated procedure for government companies to found technology companies, investing up to 10% of their equity in technology companies in the beta site stage or later, providing that the companies are registered in Israel or have significant business in Israel.

Merck Incubator

Merck, the German pharmaceutical, life sciences and chemicals giant, has founded and is investing 20M euros in a technological innovation laboratory to serve as an incubator for Israeli start-ups. Located in Yavne southeast of Tel Aviv, Merck’s partners in PMatX that will focus on next-generation electronics, include HP and Battery Ventures Fund.

Volcani Wins Prize

The Volcani Center, a government-sponsored agricultural research facility in central Israel, was among three winners of UNESCO’s 2017 Equatorial Guinea International Prize for Life Sciences Research. The award, also given to bodies from Portugal and Brazil, was for technology increasing food security in semiarid and desert environments.

Glaucoma Device

Belkin Laser of Tel Aviv, a start-up in the portfolio of the RAD Biomed Incubator, has developed a new device it says will revolutionize treatment of glaucoma. According to the company, a one-second treatment with its laser device eliminates the need to use daily eye drops for extended periods of time.

Cotton Genome

NRGene, based in Nes Tziona southeast of Tel Aviv, and Genosys of China have delivered complete genomes for two popular varieties of cotton, Upland Cotton and Extra-Long Staple Cotton. Comprehensive data about the two genomes will facilitate analysis of other strains of cotton for advanced breeding programs.

Fruit Fly Solution for India?

Biofeed, a developer of environmentally-friendly technology to control fruit fly infestations without spraying pesticides, appears to have found an interested customer in India. During Indian Prime Minister Narendra Modi’s July visit to Israel, the Kfar Truman-based Biofeed was the only Israeli agritech company to meet the Indian leader – at the request of the Indian delegation. According to a report in Haaretz, Biofeed’s technology utilizes slow-release lures to control the behavior, including the Mediterranean fruit fly (Medfly), the fly that affects olive trees, and most recently the Oriental fruit fly, the pest which damages or destroys about half of India’s mango crop each year.

Orbotech’s German Deal

Orbotech, based in Yavne southeast of Tel Aviv, has been awarded a $10M contract to provide printed circuits, imaging and scanning systems for Unimicron of Germany. Unimicron is building a new plant to produce electronic systems for the automotive and renewable energy industries.

Concealed Solar Panel

Israel Military Industries and the Shamoon College of Engineering in Beersheba.

Aerospace & Defense

Israel 8th in Defense Sales

Israel was the world’s 8th largest seller of weapons systems in 2016, according to a ranking by the Baker Tilly International accounting firm. According to the survey Israeli firms, headed by private Elbit Systems, followed by government-owned Israel Aerospace Industries, Rafael Advanced Defense Systems and Israel Military Industries, together had sales of $8.6B in defense systems. The survey, reported by Globes, did not include civilian systems, which if included would place IAI ahead of Eibit as Israel’s largest combined aerospace and defense exporter.

Record IAI Backlog

Israel Aerospace Industries had a record $11.1B backlog in orders at the end of the second quarter of 2017, the government-owned defense contractor reported. Most of the backlog increase, which amounted to $2.9M, was due to $2.4M in orders from India. Quarterly revenue, at $849M, dipped slightly by about 2%, and net profit of $21M was up from $6M in the parallel quarter of 2016.

Elbit Backlog Also Up

Private defense contractor Elbit Systems reported an orders backlog of $7.3M at the end of the second quarter, up $6.8B in the first half of 2016. Second quarter 2017 revenues of $818M rose slightly from the $804M in QII/2016. Observers noted that Elbit has benefited from recent increases in defense budgets, influenced by events including the tensions on the Korean peninsula.

In early September, Elbit said it had won an $11M contract to supply an integrated maritime C4ISR system to an Asia-Pacific navy. The contract includes interconnected coastal sensor towers, naval command centers and maritime C4I capabilities.

Barak 8 Delivered To India

The first Barak 8 (LRSAM) missiles were delivered to Indian Defense Minister Arun Jaitley and the Indian Navy at a ceremony in Hyderabad in late August. The Israel Aerospace Industries missile is part of the air and missile defense system jointly produced by government-owned IAI and India’s Defense Research and Development Organization.

Production of the Israeli-developed air defense system falls under the New Delhi government’s Make in India project, under which IAI and Rafael Advanced Defense Systems, together with India’s Baharat Dynamics have established production lines for the system in India. The Barak 8/LRSAM is part of the IAI $2.5B contract with the Indian government signed earlier this year.

Rafael-Kalyani Open India Plant

A joint venture of Israel’s Rafael Advanced Defense Systems and India’s Kalyani Group have opened a new plant in Hyderabad for the manufacture of Spike anti-tank missiles, part of an almost $1M deal for the sale of Spikes signed almost three years ago. The joint venture (Kalyani 51%-Rafael 49%) is part of Prime Minister Narenda Modi’s policy of requiring foreign companies selling to India to transfer know-how and manufacture in the subcontinent. Rafael says other weapons systems will also be manufactured in the new plant.

Rada’s U.S. Deal

Rada Electronic Industries has received an $8M order for its Multi Mission Hemispheric Radar system, from an unnamed U.S. military force. It is the Israeli defense firm’s first order from an American military customer.

Spacecom Sale Cancelled

Chinese communications company Xinwei has officially canceled its $285M purchase of Israel’s Spacecom Satellite Communications. Spacecom, which provides satellite communications services through the Israeli Amos satellites, is controlled by businessman Shaul Elovitch’s Eurocom. Elovitch is at the center of Israel Securities Authority investigation involving Bezeq, the Israeli telecom which he also controls.

Satellites Launched

Two satellites made by Israel Aerospace Industries were launched into orbit from the Guyana Space Center aboard an Arianespace launcher in early August. The Venus, a project of the Israeli and French space agencies, is designed for environmental research. IAI provided control systems for Opsat-3000, an Earth observation platform for the Italian Defense Ministry, to Telespazio, the Italian prime contractor. In late August, the Israel Space Agency reported that Venus had sent its first photographs back to Israel, including shots of Jerusalem and the city’s environs that are of unprecedented quality.

Upgraded Hermes Now Operational

The Israel Air Force says that the Hermes 900, developed and manufactured by private defense contractor Elbit Systems, is now fully operational. The UAV is an advanced version of Elbit’s Hermes 450, which has been in service for some time. According to a report in Globes, Hermes 900 has undergone several changes since a development model was deployed in 2014’s Operation Protective Edge in Gaza. Hermes 900 is capable of remaining aloft for 30 hours and reach speeds of up to 220 kph.

Seaport Contracts

Magal Security Systems has been awarded $9.8M in orders for security solutions and maintenance in three major European seaports. One of the orders, for Huelva in Spain, includes smart fences, smart closed-circuit cameras and an intrusion-detection system. Magal, based in Yehud not far from Ben-Gurion International Airport, has provided turnkey perimeter solutions to customers in over 80 countries.

Norkin Takes Over IAF

Maj-Gen Amikam Norkin, 41, is the new commander of the Israel Air Force. Norkin, who previously served as head of the IDF Planning Directorate, succeeds Maj-Gen Amir Eshel, who is retiring.

In other developments, Col. Ariella Lazarovich has been named economic adviser to IDF Chief of Staff Lt.-Gen Gadi Eizenkot. The first woman to hold the post, she will also head the Defense Ministry’s Budget Division. Col. Roman Gofman was appointed as the new commander of the Armored Corps 7th Brigade.

Baggage System

Israel Aerospace Industries and Singapore’s ST Engineering have collaborated on a new robotic baggage-handling system for Singapore’s Changi Airport that will dramatically reduce baggage loss and damage. The “smart” system determines, among other things, the best location for placing each baggage item and an IAI-designed loading device reducing strain on workers in the hold of the aircraft.

Air Defense ‘Evolution’

Israel’s air defense systems have undergone evolutionary change, particularly in the more than a decade since the Second Lebanon War, says Maj-Gen Zvika Haimovich, commander of the IDF Air Defense Division. In an interview with the English-language Jerusalem Post newspaper Haimovich called that war, in 2006, a turning point. “We didn’t have an early warning system and all the systems we have now,” the general said, adding that he can “say with certainty that the war was a trigger for Israel to get more effective systems…The war made officials understand the need for them.”

Israel’s missile defenses now include three separate systems – Iron Dome, which protects against short-range missiles, Magic Wand/David Sling, against missiles of intermediate range, and the Arrow 3 system designed to intercept and destroy longer-range weaponry at high altitudes. Despite the impressive accomplishments recorded by the systems, particularly of Iron Dome in 2014’s Operation Defensive Edge in Gaza, Haimovitch cautions that “there is no hermetic solution” to a sustained missile attack on Israel, and that no matter how good the active anti-missile defense may be, passive defense including fortified rooms in homes and shelter, is still a necessity.

New Police Helicopters

Four new H-125 helicopters went into Israel Police service in late August. The single-engine aircraft, manufactured by Airbus, are equipped with advanced systems including thermal imaging, searchlights, moving map systems and cargo slings, were financed in an arrangement with Israel’s Elbit Systems and will be maintained by the Israeli defense contractor.

New F-35 Contract Signed

Israel has signed a contract for the purchase of 17 F-35 aircraft from U.S. defense contractor Lockheed Martin. The deal, approved by the government last December, brings the total number of the U.S.-made stealth fighter to 50, making up two squadrons. Some of the planes from the initial order of 33 aircraft have already arrived in Israel; delivery of the newly-ordered 17 is expected to be completed in 2024. The Defense Ministry estimated the cost of each of the newly-ordered F-35s at less than $100M – compared to the $125M cost of each plane in the initial F-35 order.

Hercules Contract

Israel Aerospace Industries has received a 5-year, NIS 390M Defense Ministry contract to maintain the IAF fleet of Hercules transport aircraft. The planes include older C-130 models and eight Super Hercules C-130-Js acquired by the IAF a few years ago. Work will be done by IAI‘s Bedek Division, with Kanfei Maintenance, a subsidiary of Knafaim Holdings, as a subcontractor.

Intelligence Center Delayed

The Defense Ministry has delayed the tender for construction of the IDF new intelligence center in the Negev, due to the slow pace of planning infrastructure that will provide access to it and other military installations in the area. Publication of the tender, in which five large companies will be allowed to participate, was due to take place late this year.

Aeronautics Denies Azeri Attack

Aeronautics Defense Systems, the Israeli manufacturer of unmanned aerial vehicles, has denied operating a suicide drone near Armenian army positions during a recent demonstration flight for Azerbaijan, the company’s client. The Israeli Defense Ministry ordered Aeronautics’s export license to Azerbaijan suspended in the wake of reports that two Aeronautics representatives were asked to aim an Orbiter UAV over a manned Armenian position to demonstrate the UAV’s capabilities. One report of the incident, published in Globes, included a suggestion by unnamed sources that the suicide drone story had been planted by an Aeronautics competitor.

Galil Sale No Crime, State Says

There is no evidence that any Israeli individual or concern committed a crime by selling Galil ACE rifles to South Sudan, government lawyers have told the High Court of Justice. The statement came in response to a petition filed by 54 Israelis for a criminal investigation into the sale, suggesting that it may have constituted a war crime. According to a report in Haaretz, the rifles were sold to a militia associated with the South Sudanese government, and that officials who authorized the sale should have known that there were risks that the weapons would be used in what are alleged to have been war crimes and massacres.

Namer Turret

The Defense Ministry’s Merkava Directorate has completed development of Israeli-made Namer armored personnel carriers with turrets and cannons, according to a report in the Israel Today newspaper. The development, designed to increase the firepower of IDF infantry units, will also be fitted on the Eitan, the army’s new wheeled APC.

IAI Chooses Locker to Chair

Harel Locker, former director general of Benjamin Netanyahu’s Prime Minister’s Office, has been elected chairman of the board of government-owned Israel Aerospace Industries. The election by the IAI Board of Directors in mid-August is subject to approval by Defense Minister Avigdor Lieberman and Finance Minister Moshe Kahlon. Locker succeeds Rafi Maor, who left the IAI post in September 2016, leaving the country’s largest defense contractor without a chairman for almost a year.

Flying Meals

Israel’s Flytrex has teamed with Iceland’s largest instant delivery platform, in transporting take-out food by drone. Iceland’s Transport Authority has authorized Flytrek to pick up meals on one side of Reykjavik, Iceland’s capital city, and deliver them to a drop-off point of the service company, AHA, on the other side of the city, from where a truck will make the actual delivery. Flytrex, headquartered on Yehuda Halevi Street in central Tel Aviv, says it already has pilot projects with a number of clients, including the Ukraine postal service and a pharmaceutical company in Africa.

New Arms Ideas

A new armored vehicle powered by a hybrid gas-electric motor, two unmanned submarines, three new unmanned aerial vehicles, one of which is capable of firing an attached assault rifle, a series of unmanned autonomous surface vehicles including trucks and D-9 bulldozers, an assault rifle with an electro-optical aiming system that makes it difficult to miss a target – these are just some of the systems of the future unveiled by Mafat, the Defense Ministry’s Weapons Administration Authority in early September. The new equipment, all of which is in various stages of development, including preliminary stages, are part of the administration’s mandate to visualize the battlefield of the future and develop systems appropriate for it.

One of the most interesting developments is the Carmel, aimed at eventually replacing the Israel-developed Merkava main battle tank which has been in IDF service in various versions over four decades. In addition to its advanced propulsion system, the Carmel is designed to carry only two crew members, as compared to the four in Merkava and other battle tanks used by world armies. Being developed by the authority in cooperation with defense contractors, the Carmel is designed to carry a wide range of ordnance, and to be fast, deadly and inexpensive to operate.

Also unveiled were two relatively conventional UAVs, one from government-owned Israel Aerospace Industries and the other by Aeronautics, a private Israeli defense contractor. Main difference between them are in the propulsion system and payload: IAI’s, which is larger, can lift about 400 kg and has two rotors, one of which is for navigation. The smaller Aeronautics model has a smaller payload and multiple rotors. In addition Tikad, developed by Duke Robotics of the U.S., can carry and fire an assault rifle with a high degree of accuracy. The IDF is expected to reach a decision on its possible purchase and deployment within a year, according to the Defense Ministry.

Marketing Spike in Eastern Europe

Elbit Systems is looking towards combining with European manufacturers of armored vehicles to market its Spike missile systems to East European clients. According to a report in Defense News, the private Israeli defense contractor expects to sign a deal with Artec of Germany, the supplier of 88 Boxer combat vehicles to Lithuania. Other possible clients for Elbit’s Spikes include Macedonia, Romania and Slovenia, all seeking to replace Soviet-era combat vehicles.

Artillery Option

A desire to avoid restrictions on the use of cluster munitions is behind the Israeli decision to purchase new self-propelled artillery from Israeli defense contractor Elbit Systems rather than an overseas supplier, according to a report in Haaretz. The paper quoted a former Israel Defense Forces officer as saying that Elbit was chosen without a formal tender because another possible supplier, KMW of Germany, might not give the IDF what he called “complete independence” in the way the artillery would be used. Two other possible suppliers, Hanwa Techwin of South Korea and an unnamed American contractor, were not considered because the weapons they might supply did not meet IDF requirement of being fully automatic.

Meanwhile, Globes reported that a mid-August trial of Elbit‘s ATMOS, the chosen artillery system, was halted because some of its capabilities were not fully demonstrated, a problem which has subsequently been corrected. ATMOS is designed to replace U.S.-made M-109 artillery used by the Artillery Corps for many years.

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