Israel blocks US firm takeover of Iron Dome software developer

The Israeli Defense Ministry has halted a proposed takeover of Petach Tikvah-based mPrest Systems, the developer of the critical command-and-control software for the Iron Dome air defense system, by a United States-based holding company.

“Israeli defense exports and security collaborations with a series of countries are on an upward trend, as part of the Ministry of Defense’s strategy and an enabling export policy,” the ministry told JNS in recent days.

“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 defense-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 Jan. 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 Defense Systems, currently the largest shareholder in mPrest, leaving it with a minority stake in the company responsible for the “brain” of its flagship air defense interceptor.

Several former Rafael executives work at Ondas.

Security officials within the Defense Ministry, specifically the director of security of the defense 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 U.S.

Speaking to JNS on Thursday, an industry source said that a number of American companies are seeking to create bridges in the defense sphere, particularly innovative startups that have begun winning more tenders and contracts over the past two years from the Israeli Defense 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 defense 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 war that began with the Hamas onslaught on Oct. 7, 2023, and the supply chain challenges it exposed.

Speaking to cadets of the National Security College, senior IDF officers, and security officials on Jan. 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 defense, 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, emphasizing that reliance on external sources must be balanced against the need for sovereign capabilities.

nPrest was founded 25 years ago 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 Defense Prize in 2012.

On Wednesday, during a briefing with journalists, Brig. Gen. (res.) Daniel Gold, who heads the Defense Research and Development Directorate in the Defense Ministry, confirmed that Israel is moving toward more independent weapons production, while continuing to cooperate with the U.S. and other allies on joint innovation and development of capabilities.

© JNS