- €150m sale of Bergen Engines to TMH blocked on national security grounds
- Norwegian government says the deal “would have had great military strategic significance for Russia”
Aircraft engine maker Rolls-Royce (RR.) can’t seem to catch a break. The Norwegian government has blocked the sale of its marine engine business, Bergen Engines, to Russian engineering group TMH on national security grounds. Monica Mæland, Norway’s minister of justice and public security, said the €150m (£129m) deal would be formally stopped on Friday.
Rolls had only announced the agreement to sell Bergen in February, as part of a wider strategy to raise at least £2bn from asset disposals by early 2022 to shore up its balance sheet. The group has been hit hard by the collapse in global travel over the past year, swinging to a £4bn underlying pre-tax loss in 2020 and being forced to raise £5bn through a heavily discounted rights issue, bond sale and additional loans.
The Norwegian government paused the Bergen sale earlier this month to investigate its potential security implications. Mæland says they have now concluded it is necessary to prevent the business “being sold to a company controlled from a country with which we do not have security cooperation”.
Bergen supplies engines and generators to Norway’s military, as well as allies such as the US. As such, Mæland added that “the technology Bergen Engines possesses and the engines they produce would have had great military strategic significance for Russia, and it would have strengthened Russia's military capabilities”.
Rolls still plans to sell Bergen, as “the manufacture of medium-speed gas and diesel engines is not core to our long-term strategy”. The group remains committed to its disposal programme and next up is likely to be Spanish subsidiary ITP Aero, for which it says there are “multiple interested parties”. This business helps make engines for the Eurofighter Typhoon jet, so Rolls will have to choose a buyer carefully to avoid another intervention.
The vetoing of the Bergen deal is another unwanted headache for the group as it stares down a multi-year downturn in civil aerospace. The shares dropped by 6 per cent following the news and are currently sitting at 105p. Sell.
Last IC View: Sell, 114p, 11 Mar 2021
