Ultra Electronics share price (ULE) drops as it scraps a deal to buy US rival Sparton
Defence firm Ultra Electronics tumbled this morning as it scrapped a $235m (£170m) deal to buy a US rival and reported a drop in profits.
Ultra agreed to buy Sparton Corporation, which makes anti-submarine warfare devices used by the US Navy, in July. However, following discussions with the US Department of Justice over competition concerns, Ultra and Sparton have “mutually agreed” to terminate the merger, the firm said today.
Shares in Ultra dropped as much as 19 per cent this morning, sending it to the bottom of the FTSE 250 index.
AJ Bell investment director Russ Mould said 2017 had been an “appalling” year for Ultra Electronics, and the termination of the Sparton deal was yet another setback.
Ultra has been hit by cuts to defence spending in the UK, and in the year to December 2017, it revealed underlying profit before tax had fallen 8.4 per cent to £110m. Revenue edged down 1.3 per cent to £775.4m.
Executive chairman Douglas Caster said 2017 had been a “challenging” year in the group’s core defence markets, with delays to a number of programmes and contracts occurring relatively late in the year.
Ultra has also been grappling with the departure of its boss, Rakesh Sharma, who stepped down in November amid concerns of “mounting pressures” in the funding of UK defence programmes.
“Uncertainty is likely to hang over the business near-term until the previously delayed UK defence review is completed in the summer,” Mould added.
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