FTSE hits 15 month-low as Brexit transition deal lifts pound

* FTSE 100 ends down 1.7 pct but mid caps down 0.6 pct

* Micro Focus plummets after CEO quits, revenue outlook cut

* Barclays (LSE: BARC.L - news) rises after activist acquires voting rights

* Hammerson (Frankfurt: 876140 - news) jumps after France's Klepierre (LSE: 0F4I.L - news) approach (Recasts, adds details, closing prices)

By Danilo Masoni and Kit Rees

MILAN/LONDON, March 19 (Reuters) - The FTSE fell to a 15-month low on Monday after Britain and the European Union agreed on a post-Brexit transition which boosted the sterling but weighed on the internationally exposed index.

Britain's top share index fell 1.7 percent to 7,042 points, its lowest level since December 2016, while the more domestically exposed mid cap index limited its decline to 0.6 percent.

Britain and the EU agreed to a transition period to avoid a "cliff edge" Brexit next year -- though only after London accepted a potential solution for the border with the Irish Republic that may face stiff domestic opposition.

Confirmation that Britain would remain as effectively a non-voting EU member for 21 months until the end of 2020 boosted the pound but further hit the FTSE, already weighed down by a 50 percent drop in Micro Focus following a gloomy revenue outlook.

"The implications for UK equity markets are multi-faceted," said Bill McQuaker, portfolio manager at Fidelity International.

"While investors should view this as a positive development for domestically exposed UK companies, the FTSE 100 has significant exposure to overseas earnings, and a stronger pound is therefore a headwind," he said.

Big international FTSE stocks like British American Tobacco (Kuala Lumpur: 4162.KL - news) , BP, HSBC and Diageo (LSE: DGE.L - news) were all sharply lower, down between 1.6 and 3.7 percent, while among companies that benefit from a strong pound, gambling company William Hill (Frankfurt: 633847 - news) rose 4.2 percent and real estate firm Land Securities added 3.3 percent.

Elsewhere, shares in software company Micro Focus plummeted 46.3 percent, its biggest ever one-day loss, after its CEO quit and it cut its revenue outlook.

Micro Focus has had problems stemming from assets it bought from Hewlett Packard Enterprise, on which it spent $8.8 billion in 2017.

"Large acquisitions are inherently risky as they come with integration challenges. Micro Focus appears to have underestimated these challenges and is now suffering," Russ Mould, investment director at AJ Bell, said.

Micro Focus fell around 17 percent back in January after a disappointing set of results and outlook.

Barclays jumped 3.6 percent after activist investor Sherborne acquired 5 percent of voting rights in the bank.

Investors have been putting pressure on Barclays to become a profitable investment banking force. It has struggled due to low volatility and tougher regulations on capital requirements.

Mid-cap company Hammerson was a stand-out gainer, up 24 percent. Shares (Berlin: DI6.BE - news) in the UK retail landlord rose following news that it had been approached by French shopping centre operator Klepierre earlier in the month.

Hammerson rejected Klepierre's takeover bid, valued at 4.88 billion pounds ($6.80 billion), saying it "very significantly" undervalued the company.

Although the pound rose on Monday and has recovered from lows hit in the aftermath of the Brexit referendum in June 2016, it still remains below the levels it was before the vote.

Its depreciation has made British targets more affordable to overseas buyers, as highlighted by Klepierre's approach for Hammerson.

"It's pretty clear that large UK companies are being staked out by potential overseas interest," Ken Odeluga, market analyst at City Index, said.

"There's a bit of undervaluation creeping in because of potential threats around Brexit, real or imagined, and that can make companies quite attractive, and then many are willing sellers because of the same reason," Odeluga added, pointing to CME's bid for NEX Group last week.

(Reporting by Kit Rees; Editing by Angus MacSwan)