Rolls-Royce said Tuesday it had halted its planned sale of a Norwegian engine maker to a Russian company, after Norway said it might exercise a veto in the name of national security.

Rolls-Royce announced in early February that it would sell Bergen Engines for around 150 million euros ($179 million) to TMH Group, a privately owned company headquartered in Russia that makes locomotives and rail equipment.

But Norway's government said the Norwegian National Security Authority had informed the UK aerospace company that the authority was "considering if the planned sale of Bergen Engines AS to TMH group should be stopped in accordance with the security act."

Bergen Engines, which employs 950 people, has been part of Rolls-Royce since 1999, servicing engines for Norwegian Navy vessels and, according to local media reports, for the top-secret intelligence gathering ship Marjata.

"The government has been studying this matter for the last month, and can't rule out that the sale of Bergen engines to TMH Group could pose risks to national security interests," Justice Minister Monica Maeland said in a statement.

"There is therefore a need to halt this process to gather sufficient information to evaluate the transaction," she added.

The centre-right government has been under pressure by the opposition in recent days over the security implications of the deals.

Speaking to broadcaster TV2, the Norwegian Army chief Eirik Kristoffersen said the military would potentially have to cancel all its contracts with Bergen Engines.

"If a company that delivers to the defense is sold to an actor with whom we can't have a security collaboration, then we must look for new suppliers," Kristoffersen said.

In a comment to AFP, Rolls-Royce said it had complied with the government's demands.

"We alerted the Government in the proper way before announcing the sale of Bergen Engines. We understand, however, that the Norwegian Government now wishes to further investigate the deal and Rolls-Royce will cooperate in any way we can with that review," Rolls-Royce spokesman Richard Wray said in an email.

"As requested, we have paused the sales process," Wray added.

Wray also noted that the sale of Bergen Engines was "only a very small part" of the two billion pound ($2.8 billion, 2.3 billion euros), divestment programme announced last August to strengthen the company's finances.

TMH Group told AFP it had taken note of the Norwegian government's decision to conduct a review of the sale, adding it had not abandoned the deal.

"We are happy to cooperate with the Norwegian authorities in the context of these processes to the extent necessary," the company said.

"We are hopeful that, upon the conclusion of the government processes, the acquisition will be completed," it added.

phy/jll/rl

ROLLS-ROYCE HOLDINGS

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