Norway suspends Rolls-Royce asset sale on security grounds

Norway has suspended the sale of a Norwegian engine maker owned by Rolls-Royce Holdings to a Russian-controlled company while it assesses the security implications for the country’s navy and the civilian sector, the government said on Tuesday.

Norway’s NSM security agency is assessing the 150 million-euro ($178 million) sale announced on Feb. 4 of Bergen Engines to a company controlled by Russia’s TMH Group, NSM and the justice ministry said.

Britain’s Rolls-Royce said it was selling Bergen Engines as part of a disposal plan aimed at helping the maker of engines for aircraft and ships survive the pandemic.

Based in Bergen on Norway’s west coast, Bergen Engines is, among other things, a supplier to NATO member Norway’s navy which is headquartered nearby.

“There is significant uncertainty in relation to national security interests, and this uncertainty must be dealt with,” Justice Minister Monica Maeland told a news conference to announce the suspension. “We don’t know which conclusion we will draw.”

TMH Group said it would cooperate with Norwegian authorities and it was hopeful of completing the transaction.

“We are fully aware of and take seriously our export control compliance obligations,” TMH said in a statement.

“This will include those obligations that relate to Bergen Engines, relating to the protection of any controlled technology including to prevent it being used for unauthorised end use.”

Norway’s justice ministry said any ongoing due diligence linked to the sale must also be put on hold during the review.

In 2019, Norway introduced a new security law strengthening the government’s ability to impose conditions or block foreign acquisitions when vital national interests are at stake.

While NSM assesses corporate takeovers from time to time, Norway has yet to block any business transactions since the law came in, the agency said.

“It’s very difficult to estimate how long this process will take,” NSM department head Frode Skaarnes told Reuters.

Rolls-Royce shares closed down 2.3% on Tuesday, lagging a 0.2% rise in the FTSE 100 benchmark index.