By Emily Rose

JERUSALEM, Feb 10 (Reuters) - Israeli defense company Rafael Advanced Defense Systems could begin its privatization as early as late 2026, the Iron Dome missile defense maker's chairman told Reuters on Tuesday.

"We are already working on it," Rafael's Chairman Yuval Steinitz told Reuters in an interview.

Rafael, which created Israel's Iron Dome missile defense system as well as a new Iron Beam anti-missile laser, is valued at about $10 billion.

Steinitz said the first phase would be partial privatization, in which the government would retain control of more than 50 percent of the company.

"Still, it will take some time, but I believe that we might be able to conduct the first phase already, towards the end of 2026 or beginning of 2027," Steinitz said.

Last month, Reuters reported that Israel had begun the process for the long-awaited privatization of two of its largest state-owned defense companies. Rafael did not comment on the report or give a timeline for privatization.

Roi Kahlon, director of the Government Companies Authority, told Reuters in January that union and regulatory issues should be resolved in the next few months to allow initial public offerings by Israel Aerospace Industries $(IAI)$ and Rafael in the second quarter.

Defence privatisation has been discussed on and off for the past 20 years, but robust financial results bolstered by Israel's two-year war with Palestinian militant group Hamas in Gaza have strengthened the case to act now.

The government plans an initial sale of 25-30% of each company on the Tel Aviv Stock Exchange in small tranches this year and next to avoid overwhelming the market and to retain controlling stakes for now.

"If we want to remain very efficient and very flexible and to be able to compete to be even more successful than today, we need to privatize Rafael, at least partially," Steinitz said.

(Reporting by Emily Rose, Editing by William Maclean)

((Emily.Rose@thomsonreuters.com;))