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* Bergen Engines sale halted on security grounds
* Rolls-Royce had planned 150 mln euro sale to Russia's TMH
* Norway fears national security could be at risk
* Significant uncertainty for Bergen staff, Rolls-Royce says
(Adds TMH reaction in paragraphs 13-15)
By Terje Solsvik
OSLO, March 23 (Reuters) - Norway will block Rolls-Royce
from selling a Norwegian maritime engine maker to a
Russian company on national security grounds, its justice
minister told parliament on Tuesday.
The blocking of the deal is a blow for Rolls-Royce, which is
aiming to raise 2 billion pounds ($2.76 billion) from disposals
by 2022 as part of plans to recover from the pandemic.
Based on Norway's west coast, and owned by Britain's
Rolls-Royce for more than 20 years, Bergen Engines supplies NATO
member Norway's navy as well as the global shipping industry.
Norway on March 9 said it had temporarily suspended the 150
million euros ($178 million) sale to TMH Group while it assessed
security implications.
"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," Justice Minister Monica Maeland of the
centre-right minority government told parliament.
Relations between Norway and Russia, which share a border in
the Arctic, gradually improved in the post-Cold War era before
suffering a setback when Moscow annexed Crimea in 2014.
That triggered more tension in the north with a military
build-up on both sides and more frequent military manoeuvres.
"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," the Norwegian government said in a statement.
JOBS AT STAKE
Rolls-Royce said it plans to ask Norway for help to find
another option for Bergen, noting that Bergen's more than 900
jobs could be at risk.
"We do not intend to retain the business," Rolls-Royce said
in a statement.
"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."
Rolls said it remained committed to its disposal target.
TMH Group said it was disappointed by Norway's decision.
"Throughout the transaction process TMH has remained as
transparent as possible regarding the ownership structure and
development plans for Bergen Engines," TMH Group said in a
statement to Reuters.
"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."
The Russian embassy in Oslo said on March 10 that Norway's
decision to suspend the sale showed anti-Russian sentiment and
was of serious concern. The Russian embassy was not immediately
available for comment on Tuesday.
The Russian foreign ministry did not immediately respond to
requests for comment.
Norwegian opposition parties criticised the government for
being slow to respond to what they said was a national security
threat, after it emerged that Rolls-Royce had informed
authorities of a potential Russian deal late last year.
"The government failed to comprehend the severity,"
Christian Tybring-Gjedde, a lawmaker from the right wing
opposition Progress Party, said.
The case will be the subject of a special hearing in
parliament, said Jette Christensen, a lawmaker from the
opposition Labour Party.
Bergen Engines makes medium-speed gas and diesel engines for
marine and power generation customers. It had revenue of 239
million pounds in 2019.
Norway introduced a new security law that year which
strengthens the government's ability to impose conditions or
block foreign acquisitions when national interests are at stake.
While corporate takeovers have been assessed from time to
time, Norway had abstained from blocking any business
transactions since the law came in, the government's NSM
security agency said this month.
($1 = 0.8408 euros)
($1 = 0.7256 pounds)
(Additional reporting by Sarah Young in London, Gwladys Fouche
in Oslo, Tom Balmforth, Polina Devitt, Gleb Stolyarov and
Margarita Popova in Moscow, Editing by Edmund Blair, Jason Neely
and Jane Merriman)
