The Israeli defense establishment is torpedoing negotiations to sell defense systems maker Elisra Electronic Systems to an American company, complain sources affiliated with Koor Industries (NYSE:KOR), Elisra's parent company.

Defense establishment sources said Koor has not formally advised the Defense Ministry of intentions to sell Elisra. The State of Israel, they surmised, will block any sale of defense technologies to foreign countries, the U.S. being no exception.

The sources also complain that the Defense Ministry is blocking the export of certain defense technologies developed by Elisra, which reduces the company's allure to prospective buyers.

Elisra develops advanced military technologies. Its forecast sales for 2001 are $300 million. It actually consists of a group of companies: Tadiran Spectralink, Tadiran Electronic Systems and BVR Systems (Nasdaq:BVRS).

Koor recently began talks to sell Elisra to an American firm, or alternatively to Elbit-ElOp or to Israel Aircraft Industries, given limitations on exporting Elisra technologies. Another possibility is splitting up the company and selling it to different buyers, but Koor deems that option less likely.

Elbit El-Op first started talking about buying Elisra in August, assessing that Koor would sell because of its cash crunch and pressure from shareholder and creditor Bank Hapoalim. Though Elbit-Elop prepared for a three-way merger, the negotiations have yet to mature into a deal.

Elbit El-Op values Elisra for the purpose of the transaction at $200 million to $250 million. Koor values it at $350 million to $400 million.

Private sector sources say the negotiations are based on a $250 million value for Elisra. Koor commented that Elisra should command more considering its finances and weighty backlog.