UPDATE 2-KLK, Boustead Plantations' $243 mln stake deal falls through in Malaysia

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Boustead will return 229.2 mln ringgit deposit to KLK

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Deal failure could weigh on M&A activities in Malaysia

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Boustead shares hit lowest in almost 2 months before suspended

(Adds context in paragraph 5 and 6, and shares performance in paragraph 9)

By Poonam Behura and Yantoultra Ngui

Oct 4 (Reuters) - Malaysian palm oil producer Kuala Lumpur Kepong on Wednesday said a 1.15 billion ringgit ($243.18 million) deal for it to acquire a 33% stake in smaller rival Boustead Plantations has been terminated.

KLK, as the company is known, said a condition to finalise the share acquisition will not be satisfied by the cut-off date of Oct. 6, but did not give further details.

Boustead will return a deposit sum of 229.2 million ringgit to KLK as a result of the termination.

KLK had in August disclosed plans to take over Boustead along with other top shareholders, in due course, in a deal worth 3.47 billion ringgit.

The falling through of the deal could weigh on merger and acquisition activities in the Southeast Asia nation.

In August, Malaysian conglomerate Sime Darby announced plans

to buy

a majority stake in local industrial group UMW Holdings for 3.57 billion ringgit in a move that could spearhead the country's electric vehicle sector.

Shares of Boustead sank to their lowest in nearly two months in the previous session, losing 13%, with the company halting trading in its shares since Tuesday. Shares will resume trade on Thursday, filings showed.

Earlier in the day, Bloomberg reported citing its sources that KLK was in discussions with Malaysia's military pension fund - Lembaga Tabung Angkatan Tentera, which holds majority interest in Boustead, to rework the deal. ($1 = 4.7290 ringgit) (Reporting by Poonam Behura in Bengaluru and Yantoultra Ngui in Singapore; Editing by Nivedita Bhattacharjee and Andrea Ricci)