March 5, 2018 / 8:19 AM / a year ago

UPDATE 1-Britain's Ultra Electronics ends Sparton deal, shares slump

(Adds context, details on Sparton deal, results; shares)

March 5 (Reuters) - Ultra Electronics said on Monday it terminated the $234 million acquisition of Sparton Corp due to anti-trust concerns raised by the U.S. Department of Justice, sending the British defence contractor shares down 17 percent.

Ultra Electronics said in July that it would buy Sparton, which makes anti-submarine warfare devices used by the U.S. Navy, to create a major supplier in underwater warfare, including to the U.S. Department of Defense.

Following a delay in DoJ approval, which Ultra Electronics disclosed in September, the companies mutually decided to terminate the acquisition on Monday, the UK firm said in a statement.

Shares of Ultra Electronics were down as much as 19 percent, making it the biggest percentage loser on the FTSE midcap index.

Ultra Electronics had previously reached an agreement with the DoJ on time targets for further document submission and also on the time limits for the DoJ's discovery and decision-making after the department sought additional information under the Hart-Scott-Rodino Antitrust Improvements Act.

"Ultra had believed that by maintaining two production sites and R&D teams the DoJ would approve the merger, but this was not the case," Investec analysts said in a client note.

Ultra Electronics also said underlying operating profit fell to 120.1 million pounds ($165.5 million) for the year ended Dec. 31, from 131.1 million pounds a year earlier, bogged down by lower defence orders in the UK.

"The Sparton news is likely to overshadow the results, which are as expected in profit terms," Investec analysts added.

Ultra Electronics reiterated its expectations to make modest progress in underlying revenue and operating profit at constant currencies in 2018.

$1 = 0.7258 pounds Reporting By Justin George Varghese in Bengaluru; Editing by Amrutha Gayathri

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