LONDON, June 1 (Reuters) – British military-goods maker Chemring (CHG.L) said it would not proceed with its $59 million acquisition of Allied Defense Group (ADG.A) due to an ongoing corruption investigation into a former employee of one of the U.S. firm’s units. Earlier this year ADG, which Chemring agreed to buy in January, said an employee at its Mecar USA subsidiary was being investigated by the U.S. Department of Justice (DoJ) for the alleged bribery of foreign government officials to win business on behalf of an unrelated U.S. company.
The DoJ has since widened its probe beyond matters related to the former employee of Mecar USA, which manufactures and sells ammunition and related products to the U.S. and foreign governments.
“In light of this feedback from the DoJ, the Chemring board has concluded that it is presently unwilling to consummate the acquisition of ADG pursuant to the terms of the merger agreement,” Chemring said in a statement on Tuesday.
“Chemring is now reviewing its options with regards to ADG, which may include a restructuring of the transactions contemplated by the merger agreement.”
Shares in Chemring, whose products help fighter planes avoid missile attacks, were 2.7 percent down at 3,085 pence by 0806 GMT, valuing the group at around 1 billion pounds ($1.5 billion).
(Reporting by Rhys Jones; Editing by Paul Sandle)