Settlement Talks Under Way in Advo-Valassis Litigation

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A trial to decide whether Valassis Communications should be allowed to back out of a $1.3 billion acquisition of Advo Inc. was adjourned Monday as attorneys worked on a possible settlement.

Vice chancellor Leo Strine Jr. adjourned the trial, which started a week ago, for one day pending the outcome of settlement talks.

It was not immediately clear what prompted settlement discussions halfway through the planned two-week trial in Delaware Chancery Court in Wilmington.

“I can’t comment at this time,” said Andy Hopson of Ruder Finn, a spokesman for Valassis.

Pam Kueber, a spokeswoman for ADVO, did not immediately return a telephone call Monday morning.

Valassis, based in Livonia, Mich., has accused Windsor, Conn.-based Advo of withholding and fabricating financial information during acquisition talks earlier this year.

Advo, the nation’s largest direct mail marketer, countersued, saying Valassis is simply suffering from buyer’s remorse and is trying to drive down the purchase price.

Last week Valassis chief executive Alan Schultz testified that in a May meeting with Advo officials, Advo chief financial officer Jeffrey Epstein failed to disclose that the company had downgraded its forecast for 2006 earnings before taxes to $54 million from $76 million.

Instead, Epstein said changes made by Advo to a February business forecast, when the companies were still exploring a merger of equals, were “minimal,” and expressed “tremendous confidence” in Advo’s 2007 forecast, Schultz said.

Schultz acknowledged, however, that he had long thought that a consolidation of the marketing services industry would be beneficial, and that Advo seemed to be a good fit for Valassis.

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

Advo shares rose $1.74. or 5.5 percent, to $33.51 in trading Monday on the New York Stock Exchange.

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