The Israeli Defence Ministry has halted a proposed takeover of Petah Tikvah-based mPrest Systems, the developer of the critical command-and-control software for the Iron Dome air defence system, by a US holding company.
“Israeli defence exports and security collaborations with a series of countries are on an upward trend, as part of the Ministry of Defence's strategy and an enabling export policy,” the ministry told JNS.
“However, there is not and will not be any compromise on security needs,” it added, appearing to confirm the blockage.
The move highlights the conflict between the goal of attracting foreign capital to the Israeli defence-tech sector and the rigid imperative to maintain local control over its most sensitive military capabilities.
American firm Ondas Inc. (formerly Ondas Holdings Inc.), according to a Ynet report on January 18, offered to acquire control of mPrest in a deal that would value the Israeli software company at more than $200 million. Under the terms of the proposed transaction, Ondas sought to purchase the shares of mPrest's existing private shareholders for approximately $100 million.
The acquisition would have diluted the holdings of the state-owned Rafael Advanced Defence Systems, currently the largest shareholder in mPrest, leaving it with a minority stake in the company responsible for the “brain” of its flagship air defence interceptor.
But security officials within the Defence Ministry, specifically the director of security of the defence establishment, reportedly intervened to delay and effectively block the deal.
The primary concern stems from the transfer of control over classified command-and-control capabilities to a foreign entity, even one based in a close ally such as the US.
Speaking to JNS on Thursday, an industry source said that a number of American companies are seeking to create bridges in the defence sphere, particularly innovative startups that have begun winning more tenders and contracts over the past two years from the Israeli Defence Ministry.
The field of counter-unmanned aerial systems is a strong case in point of this trend, the source said.
As such, companies like Ondas are trying to gain a foothold in the Israeli startup defence sector.
The blockage of the deal comes amid a broader strategic push by Prime Minister Benjamin Netanyahu to fortify Israel's independence in military production, a lesson learned during the recent Gaza War and the supply chain challenges it exposed.
Speaking to cadets of the National Security College, senior IDF officers, and security officials on January 20, Netanyahu outlined the national security directives that are shaping such regulatory decisions.
“We are turning Israel into a regional power, and in some things a global power. We need very strong defence, independent production capacity, and to deepen the relative advantage,” he said.
The prime minister reviewed the decisive decisions made throughout the war that led to a change in the face of the Middle East, emphasising that reliance on external sources must be balanced against the need for sovereign capabilities.
mPrest was founded in 2001 by Natan Barak, a retired Israeli Navy officer. Its prominence skyrocketed roughly 15 years ago when its software was selected to manage the complex interceptions of the Iron Dome system, earning the company the Israel Defence Prize in 2012.
On Wednesday, during a briefing with journalists, Brigadier General (res) Daniel Gold, who heads the Defence Research and Development Directorate in the Defence Ministry, confirmed that Israel is moving toward more independent weapons production, while continuing to cooperate with the US and other allies on joint innovation and development of capabilities.
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