Valassis Communications Inc.’s acquisition of Advo Inc. (directmag.com/news/ftc_valassis_advo/index.html) hit a major snag when marketing firm Valassis sued to terminate the $1.3 billion deal. Advo provides shared mail services.
On Wednesday, Vlassis filed papers in the Delaware Chancery Court to rescind its offer. Valassis is also seeking unspecified damages from Advo.
The papers allege that Advo management lied about the company’s financial health. According the papers, Advo “intentionally provided Valassis with materially false financial information and withheld material information at a time when [Advo’s] operating income was materially off forecast.”
In a response filed with the SEC, Advo management said that while it had not fully reviewed the lawsuit, it believed that the claims were “baseless and without merit.” Advo specifically rejected the charges of fraud and changes in business performance issues that affected the company’s long-term earning potential.
“Advo can only surmise that Vlassis’ action is merely a smokescreen to hide the fact that Valassis is suffering from an extreme case of buyer’s remorse,” Advo’s filing continued. “Advo remains committed to the transactions contemplated by the binding merger agreement, and will take action to enforce that agreement and vigorously defend itself against Valassis’ claims.”
When the acquisition was first announced, Valassis offered $37 per share of Advo stock. At the close of business Thursday Advo’s stock price stood at $28.59, following an $8.21 per-share drop.
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