A Firefly drone by Rafael Advanced Defense Systems is on display during the Eurosatory International Defence Exhibition in Villepinte, north of Paris, France June 11, 2018. REUTERS/Gonzalo Fuentes

JERUSALEM (Reuters) - Israel's state-owned Rafael Advanced Defense Systems and businessman Avihai Stolero have offered to buy unmanned aerial vehicle maker Aeronautics ARCS.TA for 850 million shekels ($232 million).

The news sent shares of Aeronautics up 37 percent in morning trade in Tel Aviv on Sunday. Aeronautics rejected a 430 million shekel offer from Rafael and Stolero last August.

Aeronautics, which had a market value of 507 million shekels on Jan. 10, said the latest offer for all its shares would be done as a reverse merger executed through a company jointly owned by Rafael and Stolero.

The company would become private and its shares delisted from the Tel Aviv Stock Exchange.

Aeronautics said it had agreed to hold talks with the potential buyers and committed to giving them exclusivity. Negotiations will take place until Feb. 15, during which time Rafael will conduct due diligence.

Earlier this month, state-owned Israel Aerospace Industries [ISRAI.UL] said it was in early talks to invest in Aeronautics.

In 2017, Aeronautics said the Defence Ministry had suspended the marketing and export license for one of the firm’s attack drones to a significant customer in a foreign country. The company denied any wrongdoing.

Israeli media reported at the time that the ministry had opened an investigation into Aeronautics over whether during a product demonstration in Azerbaijan one of its drones was used to attack a military position in the neighboring country of Armenia, and if so, who was at fault.

Aeronautics manufactures unmanned aerial vehicles for military surveillance and defense purposes, as well as for the commercial sector.