By: Jennifer Saba
Valassis and ADVO have agreed to merge, amending the original terms of the deal. Valassis will acquire ADVO for $33 per share in cash or $1.2 billion including the $125 million in ADVO long-term debt.
The only condition applied to the close of the deal is ADVO shareholder approval.
The transaction is expected to close before Feb. 28. If the close is delayed, Valassis is required to pay ADVO shareholders interest on the $33 per share purchase price at a rate of approximately 11% per year with the rate increasing every month thereafter.
“Valassis determined that the evidence will not support the conclusion that ADVO or any of its directors, officers, agents or representatives engaged in any fraud or other misconduct in connection with the parties’ entry into their original merger agreement,” said a joint statement issued by Valassis and ADVO.
In the statement, Valassis Chairman, President, and CEO Alan Schultz said, “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.”
The agreement marks an end to a bitter battle that started shortly after the companies agreed to merge. On July 6, Valassis said it would buy ADVO for $1.3 billion or $37 per share in cash.
Valassis produces and distributes free-standing inserts in newspapers and ADVO is a direct mail company and sometime tough rival to the newspaper industry. The combined company would serve 20,000 global advertisers, including 94 of the top 100 in the U.S.
Both sides sold the acquisition as a marriage of love. “Since I took over as CEO eight years ago,” said Schultz during a conference call after the deal was announced in July, “I have believed that a Valassis/ADVO combination was compelling.”
Analysts viewed union with much more skepticism: “We are not yet fully comfortable that buying ADVO won’t upset some of Valassis’ newspaper partners, which could ‘de-activate’ themselves from Valassis network and work exclusively with News America,” wrote Paul Ginocchio, an analyst with Deutsche Bank, in a note released in July.
The situation started to sour when on Aug. 30 Valassis filed a lawsuit against ADVO in the Delaware Court of Chancery claiming fraud, misrepresentation and that ADVO cooked its books. ADVO countersued alleging that Valassis executives had cold feet.
ADVO shareholders approved the merger in a special meeting in September.
Since the lawsuits were filed, both sides issued a flurry of press releases making their case for (ADVO) or against (Valassis) the transaction.
The trial started on Dec. 11. On Monday, both sides agreed to talk and the trial was adjourned for one day pending on the outcome. Because both sides reached an agreement, the trial has been dismissed.