Rafael acquires drone-focused firm in $240M deal

By: Seth J. Frantzman

JERUSALEM — Israeli defense company Rafael Advanced Defense Systems' acquisition of local firm Aeronautics Limited combines the former's expertise in intelligence, surveillance and reconnaissance with the latter's ties to the UAS market.

“We have a strong feeling and understanding that the world is changing and moving more operational requirements toward unmanned vehicles and specifically unmanned aerial vehicles,” said Yuval Miller, executive vice president of aerial and C4I systems divisions at Rafael.

The 850 million shekel (U.S. $240 million) deal has been in the works for more than a year and received approval earlier this year. Under the agreement, announced Sept. 3, Rafael will hold a 50 percent stake in Aeronautics along with businessman Avichai Stolero.

Rafael, which is known for its Iron Dome air defense system, Trophy active protection system, Litening pods and advances in artificial intelligence, sees an advantage in adding UAS to its global strategy. Aeronautics has a portfolio involving 50 countries and a spectrum of UAVs. Rafael says it has in-house capabilities such as sensors, systems and munitions that have been used on fighter jets and other platforms that can pair well with what it describes as Aeronautics' lower-tier UAVs.

Rafael has historically cooperated with other local and foreign companies that make UAVs, such as Elbit Systems and Israel Aerospace Industries. For instance, its RecceLite pod was integrated on General Atomics' Predator B/MQ-9s with the Italian Air Force in 2016. But Rafael noticed even more potential in the platforms made by Aeronautics, including its Orbiter UAV products, such as the Orbiter 3 lightweight drone that has a range of 150 kilometers and is used for intelligence, surveillance, target acquisition and reconnaissance missions.

“These platforms are becoming more robust and their endurance has grown significantly,” Miller said. Indeed, the market is growing in size, to the tune of billions of more dollars in annual spending over the next decade alongside the bolstered capability and and further miniaturization of UAVs.

“This has put us in a position to look for a partner, and we found that Aeronautics, which has an excellent portfolio in 50 countries around the world, and their UAV platforms on the lower tier are world leading, and binding that with Rafael's network and sensor capability looks like excellent synergy,” said Miller, who foresees a fast-growing business with the acquisition.

Rafael plans to maintain Aeronautics as an independent company, which will evolve its business to Rafael's products. The two companies already partnered in acquiring Controp Precision Technologies in 2012. Controp makes electro-optical systems. Rafael envisions a productive meshing with its electro-optics for ISR missions and area surveillance.

“We are talking about onboard advanced image processing and [artificial intelligence], and today that also is available in small and lightweight for lower-tier and low-cost UAVs,” Miller said.

Currently, medium-altitude, long-endurance and high-altitude, long-endurance UAVs are costly, but stronger and smaller drones will evolve and combine more sensors and networks, fusing data for an overall customer gain, according to Rafael.

Rafael did not discuss how it might mesh with Aeronautics' loitering munitions, such as the Orbiter 1K.

The acquisition is part of a growing trend of consolidation in Israel, which saw Elbit acquire former state-owned IMI last year. In 2017 and 2018, Aeronautics was under several investigations that saw its exports restricted and stock price falter. Those hiccups now appear to be behind the firm.

https://www.defensenews.com/industry/2019/09/05/rafael-acquires-drone-focused-firm-is-240m-deal