The original complaint charges ADVO and certain of its officers and directors with violations of the Securities Exchange Act of 1934. ADVO is a direct mail media company that engages in soliciting and processing printed advertising from retailers, manufacturers, and service companies in the United States and Canada.
Specifically, the complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company's business and financial results, concealing material adverse problems in ADVO's long-term financial health and intrinsic value. Defendants concealed this information in order to accomplish a merger which the Company had entered into with Valassis Communications, Inc. ("Valassis"), a leading company in marketing services, to create the largest integrated media services provider in the nation. Valassis was acquiring all of ADVO's outstanding common stock in an all cash transaction. As a result of defendants' false statements, investors believed the acquisition would occur, causing ADVO's stock to trade at artificially inflated prices during the Class Period, reaching a high of $36.80 per share in August 2006. Then, on August 30, 2006, Valassis announced that it had filed an action to rescind its merger agreement with ADVO. On this news, the Company's shares fell to $28.59 per share.
According to the complaint, to accomplish the merger, ADVO officers and employees concealed material information, including that: (a) its business had deteriorated so badly that it would never be replaced; (b) its financial internal controls were woefully inadequate; and (c) its business was not as nearly successful as the market and Valassis had been led to believe.
On April 24, 2007, Judge Alfred V. Covello signed an order granting the plaintiff's motion to consolidate several similar class actions, approval of Robert Kelleher to act as lead plaintiff and the selection of Lerach Coughlin Stoia Geller Rudman & Robbins to serve as lead counsel. Plaintiff's filed their consolidated complaint on June 8, 2007. On April 28, 2008 the lead plaintiff defeated the defendants' motion to dismiss the case.
On August 29, 2008, the lead plaintiff filed a motion to certify the class, which was approved on March 30, 2009. The parties soon after engaged in mediation proceedings. On October 28, 2009, a Stipulation of Settlement and motion for preliminary approval of the class action settlement were filed. The proposed settlement is in the amount of $12,500,000 in cash. On December 10, 2009, Judge Alfred V. Covello signed the Order preliminarily approving the settlement and providing for notice. A Settlement Hearing is scheduled for March 3, 2010.
On March 3, 2010, Judge Alfred V. Covello signed the orders approving the attorney fees and expenses, the plan of allocation and the final settlement. The action is now dismissed with prejudice.