This morning, Ultra Electronics, a Defence firm, tumbled as it scrapped a deal amounting to $235m (£170m) to acquire a rival in the United States and reported a decline in its profits.
Last July, Ultra agreed to acquire Sparton Corporation, which manufactures anti-submarine warfare devices that are used by the US Navy. However, today, the firm said that following negotiations with the US Department of Justice regarding competition concerns, Sparton and Ultra have “mutually agreed” to drop the merger.
This morning, the shares in Ultra plunged by as much as 19 percent sending the company to the bottom of the FTSE 250 index.
Russ Mould, the investment director of AJ Bell, said that last year had been an “appalling” year for Ultra Electronics, and the termination of the deal with Sparton was yet another setback for the company.
Ultra has been affected by reductions in defence spending in the United Kingdom, and in the year to December 2017, the company revealed that the underlying profit before tax had dropped by 8.4 percent to £110m. Revenue edged down by 1.3 percent to £775.4m.
Douglas Caster, the executive chairman, said that last year had been a “challenging” year in the core defence markets of the group, with delays to various contracts and programme happening relatively late in the year.
The company has also been grappling with the departure of Rakesh Sharma, its boss who stepped down last November amid fears of “mounting pressures” in the funding of defence programmes in the United Kingdom.
“Uncertainty is likely to hang over the business near-term until the previously delayed UK defence review is completed in the summer,” added Mould.