The Norwegian government has today said it will block Rolls-Royce’s attempt to sell an engine-making firm to a Russian company on national security grounds.
Last month the FTSE blue chip firm announced it would sell Norwegian firm Bergen Engines to TMH Group for €150m (£132.5m).
The disposal is part of plans by the aerospace giant to fix its battered balance sheet by selling of £2bn worth of assets.
Rolls-Royce said it would seek the Norwegian government’s help in finding a new buyer.
However, after indicating that it could block the sale, Norway’s justice minister today confirmed that the security issues of such a sale were too risky.
“We now have sufficient information to conclude that it is necessary to prevent the company from being sold to a group controlled from a country with which we do not have security cooperation,” Monica Maeland said.
Bergen supplies engines to Norway’s navy as well as the global shipping industry. In a statement, the government said:
“The technology possessed by Bergen Engines, and the engines they produce, would have been of significant military strategic interest to Russia, and would have boosted Russian military capabilities,”
Shares in the firm, which were already struggling due to new restrictions on people travelling abroad from the UK, fell 5.9 per cent today.
In a statement, Rolls-Royce said that it was awaiting formal notification of the ban from Norwegian officials.
“Today’s announcement will cause significant uncertainty in Bergen Engines, which employs more than 900 people worldwide including 650 in the main factory in Hordvikneset”, it said.
“We will be seeking the assistance of the Norwegian Government to swiftly find another option, which can provide Bergen Engines and its people with the investment required for the future and Rolls-Royce with an appropriate outcome.”
Buyer TMH expressed its disappointment at the blocking of the sale, saying it had been “as transparent as possible” around its plans for the firm.
“In the course of TMH’s preparation for the transaction, nothing has been found that would indicate that the Norwegian Security Act applies to the transaction”, it added in a statement.
Bergen Engines was the second sale Rolls-Royce had announced as part of the disposal plan so far.
In the autumn, it sold off its nuclear instruments business to French firm Franatome for an undisclosed fee.
Today’s setback could mean yet more pain for the engineer, after it fell to a £4bn loss in 2020 due to the pandemic.