Valassis and Advo have dismissed their lawsuits against each other and will complete their $1.2 billion merger.

Valassis sued Advo in August to abort its $1.3 billion purchase of Advo. The company accused Advo of presenting false information and withholding information during acquisition negotiations.

Advo called the suit "an extreme case of buyer's remorse," and countersued in September to force the merger (PROMO Xtra, Sept. 1, 2006).

Valassis later backed off its claim after reviewing more than 1 million documents from Advo and deposing 30 witnesses. The company said that the evidence doesn’t prove fraud or misconduct at Advo during the initial negotiations. This week, the companies amended the terms of the merger agreement, including a $100 million drop in the purchase price. All the deal needs now is approval of Advo shareholders; that group overwhelmingly approved the merger in mid-September. (The Federal Trade Commission first approved the deal on Aug. 16, six weeks after Valassis announced its intention to buy Advo.)

The merger is now expected to close in first-quarter 2007. Valassis still plans to refinance the $125 million of Advo debt that it will incur when the deal goes through.

Once combined, the companies will be the biggest player in in-store and direct-marketing media, with combined annual sales of about $2.5 billion. The in-store and FSI portfolio of Livonia, MI-based Valassis complements the direct-mail heft of Windsor, CT-based Advo.

Valassis reaches 60 million households with weekly FSIs; Advo reaches 114 million households via direct-mail. Together, the companies will offer customized media that targets consumers nationally, regionally, by ZIP code, sub-zip code or household. Valassis’ sales hit $1.13 billion in 2005; Advo reports annual sales of $1.4 billion.

"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," said Valassis President and CEO Alan Schultz in a statement. Advo CEO Scott Harding concurred.

"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," Harding said. "We look forward to focusing our energy on creating value through combining and growing our businesses."

The suits, both filed in Court of Chancery for New Castle County, DE, were dismissed with prejudice.

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