By: Advo Inc. on Friday accused marketing company Valassis Communications Inc. of trying to force a lower sale price by attempting to terminate its $1.3 billion agreement to buy the nation's largest direct-mail marketer.
Advo shares fell 22 percent on Thursday after Valassis filed a lawsuit to block the deal. Advo has accused Valassis of "buyer's remorse" after Valassis agreed to buy the company.
"The lawsuit appears to be a tactic designed to pressure Advo to agree to a price lower than the parties' binding agreement requires," Advo said in a statement Friday.
After Thursday's decline, shares of Windsor, Conn.-based Advo rose $2.06, or 7.2 percent, to $30.65 in early trading Friday on the New York Stock Exchange. Valassis shares fell 35 cents to $19.37 in trading Friday.
Valassis, based in the Detroit suburb of Livonia, said its suit filed Wednesday in Delaware Chancery Court was based on allegations that Advo management misrepresented the financial health of the company and failed to reveal internal control deficiencies.
Advo denied wrongdoing and said it intended to enforce the merger agreement announced in early July.
Valassis also is seeking an undisclosed amount of damages from Advo.
Valassis announced last month that it was acquiring outstanding shares of Advo for $37 each. The combined company was expected to serve about 20,000 advertisers, including 94 of the top 100 in the U.S., with direct mail, newspaper inserts, coupon fliers, e-mail marketing and other programs.
The combined company would have about 7,900 employees with operations in nine countries, Valassis and Advo said.
Ed Atorino, an analyst with the Benchmark Co. in New York, said Thursday t hat the deal is essentially dead after Valassis accused Advo of fraud.
"Clearly something in the financial information that was provided by Advo to Valassis in recent months was disturbing to Valassis and caused them to withdraw," he said.
"Advo is back where it was before the deal, which makes sense," Atorino said. "Valassis is also getting hammered, which is a little surprising, but that's the way it goes."
Valassis, based in the Detroit suburb of Livonia, said its action filed Wednesday in Delaware Chancery Court was based on allegations that Advo management misrepresented the financial health of the company and failed to reveal internal control deficiencies.
Advo denied wrongdoing and said it intended to enforce the merger agreement announced in early July.
Valassis also is seeking an undisclosed amount of damages from Advo.
Government regulators had approved the merger but Advo shareholders had not given final approval, Valassis spokesman Andy Hopson said.
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