SCHAUMBURG, IL -- Sparton and Ultra Electronics have terminated their merger agreement following a review by the US Department of Justice.

The respective EMS companies had signed a deal last Jul. 7, and had received approvals from shareholders and several agencies prior to the DoJ review.

As part of the Justice review, the US Navy, a customer of the two firms' joint venture known as ERAPSCO, indicated it would recommend DoJ block the merger. Instead, the Navy recommended the two companies improve their respective capabilities to produce sonobuoys, which the Navy buys from ERAPSCO, with the ultimate goal to eliminate the JV.

In light of the Navy's objections, DoJ staff informed Sparton and Ultra it intended to recommend the DoJ block the merger. Had the DoJ chosen that path, it would have likely sought a court injunction. In response, Sparton and Ultra determined that it was in the best interests of the parties to proceed to terminate the merger agreement.

The DoJ plans to open an investigation for purposes of evaluating ERAPSCO, and Sparton said it anticipates that the Navy will assist in funding Sparton’s transition to independently developing, producing and selling sonobuoys.

In a statement, Sparton said it will seek to re-engage with parties that previously expressed an interest in acquiring the EMS.

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