Settlement reached in Advo-Valassis suit

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DOVER, Del. (AFX) - Valassis Communications won't be backing out of a deal to acquire direct mail marketer Advo, but it is getting more bang for its buck.

Under a settlement announced Tuesday, Valassis will acquire all of Advo's outstanding common shares for $33 each, or about $1.05 billion.

That's down from a price of $37 per share, or $1.18 billion, the two companies agreed to in a deal announced in July. Valassis also has agreed to assume about $125 million in Advo debt.

"Valassis is in a better position at $33 per share rather than $37 per share," said Valassis spokesman Andy Hopson.

Hopson would not comment on what prompted the settlement, which brought an abrupt end to a trial that began last week in Delaware Chancery Court in Wilmington.

Valassis shares rose 62 cents, or 4.3 percent, to $14.90 in trading on the New York Stock Exchange. Advo shares closed down 40 cents, or 1.2 percent, at $32.60.

Valassis, based in Livonia, Mich., alleged in its court complaint that Windsor, Conn.-based Advo withheld and fabricated financial information during acquisition talks earlier this year.

Advo, the nation's largest direct mail marketer, countersued, accusing Valassis of suffering from buyer's remorse and trying to drive down the purchase price.

Valassis president and CEO Alan Schultz testified last week that Advo executives withheld negative financial information during the acquisition talks in an effort to drive up the purchase price. Valassis stipulated that evidence in the lawsuit would not support the conclusion that Advo or any of its representatives engaged in fraud or misconduct.

The two companies expect to complete the deal in the first quarter, following approval by Advo shareholders. If closing is delayed beyond Feb. 28 for reasons other than Advo shareholder approval, Valassis must pay Advo stockholders interest on the $33 per share purchase price, beginning at 11 percent annually and increasing monthly.

"We are glad to have reached an agreement with Valassis that allows us to move forward with a merger that has always made tremendous sense," Advo chief executive officer Scott Harding said in a prepared statement.

Advo spokesman Eric Brielmann declined to comment beyond Harding's statement.

Schultz issued a statement saying the company was glad to put the lawsuit behind it.

"As we have maintained since the execution of the original agreement, we believe in the strategic value of an Advo and Valassis combination and look forward to becoming a more diversified company with the benefits it will bring," Schultz said.

Valassis relies heavily on freestanding advertising inserts, such as those delivered with newspapers and in consumer packaging. Advo specializes in direct mailings that often compete with newspapers in the distribution of preprinted advertising.

Advo: http://www.advo.com