UPDATE 1-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 rises after activist acquires voting rights

* Hammerson jumps after France's Klepierre approach(Recasts, adds details, closing prices)

By Danilo Masoni and Kit Rees

MILAN/LONDON, March 19 (Reuters) - The FTSE fell to a15-month low on Monday after Britain and the European Unionagreed on a post-Brexit transition which boosted the sterlingbut 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 moredomestically exposed mid cap index limited its declineto 0.6 percent.

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

Confirmation that Britain would remain as effectively anon-voting EU member for 21 months until the end of 2020 boostedthe pound but further hit the FTSE, already weighed down by a 50percent 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 developmentfor domestically exposed UK companies, the FTSE 100 hassignificant exposure to overseas earnings, and a stronger poundis therefore a headwind," he said.

Big international FTSE stocks like British American Tobacco, BP, HSBC and Diageo were allsharply lower, down between 1.6 and 3.7 percent, while amongcompanies that benefit from a strong pound, gambling companyWilliam Hill rose 4.2 percent and real estate firm LandSecurities added 3.3 percent.

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

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

"Large acquisitions are inherently risky as they come withintegration challenges. Micro Focus appears to haveunderestimated these challenges and is now suffering," RussMould, investment director at AJ Bell, said.

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

Barclays jumped 3.6 percent after activist investorSherborne acquired 5 percent of voting rights in thebank.

Investors have been putting pressure on Barclays to become aprofitable investment banking force. It has struggled due to lowvolatility and tougher regulations on capital requirements.

Mid-cap company Hammerson was a stand-out gainer,up 24 percent. Shares in the UK retail landlord rose followingnews that it had been approached by French shopping centreoperator Klepierre earlier in the month.

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

Although the pound rose on Monday and has recovered fromlows 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 tooverseas buyers, as highlighted by Klepierre's approach forHammerson.

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

"There's a bit of undervaluation creeping in because ofpotential threats around Brexit, real or imagined, and that canmake companies quite attractive, and then many are willingsellers because of the same reason," Odeluga added, pointing toCME's bid for NEX Group last week.

(Reporting by Kit Rees; Editing by Angus MacSwan)