Israel plans to privatise loss-making Israel Military Industries Ltd (IMI), manufacturer of the legendary Uzi sub machinegun, Defence Minister Moshe Yaalon said on Wednesday.

"I am pleased at the green light for the privatisation of IMI," Yaalon said in a statement, explaining that, despite its "excellent products," the company had losses that did not permit its survival.

IMI will be split up, with certain parts folded in to a new state enterprise for reasons of "vital national security," according to Globes business daily.

In exchange for the privatisation, the defence ministry will receive a 300 million shekel ($84 million/62 million euro) budget supplement, after promising to place 500 million shekels in orders a year over five years, the newspaper said.

"These orders are intended to guarantee the jobs of the employees at the new government company," it said.

At the same time, properties in and near Tel Aviv that currently house the company's production facilities will be sold for major real estate developments, the newspaper said.

In addition to the Uzi, of which more than 10 million have been produced, IMI also makes the Galil assault rifle, machineguns and armoured vehicles.

And it has a division that trains security agents and bodyguards.