ADVO left us with no choice. The pertinent information we received was erroneous, projections were grossly inaccurate and we believe we were the victims of fraud.
Alan F. Schultz, Valassis Chairman, President and CEO

Valassis Communications, Inc. has filed suit against ADVO, Inc. in Delaware Court to rescind its $1.3 billion merger agreement with ADVO. ADVO stock is down over $9 per share (25%) on the news. Vallassis announced the merger just weeks ago (see story) and received regulatory approval on August 16th.

According to Valassis, "ADVO management materially misrepresented the financial health of the company and failed to reveal internal control deficiencies."

According to the complaint, ADVO intentionally provided Valassis with "materially false financial information" and "withheld material information" at a time when the operating income was materially off forecast. The complaint also alleges that ADVO executives knew of, but did not disclose, significant internal control deficiencies associated with ADVO's enterprise- wide order-to-cash system.

ADVO officials responded, "ADVO can only surmise that Valassis’ action is merely a smokescreen to hide the fact that Valassis is suffering from an extreme case of buyer’s remorse."

"We believe that taking this action is in the best interest of our shareholders," said Alan F. Schultz, Valassis Chairman, President and CEO. "ADVO left us with no choice. The pertinent information we received was erroneous, projections were grossly inaccurate and we believe we were the victims of fraud."