LIVONIA, Mich., and WINDSOR, Conn., July 6 -- Valassis, a leading company in marketing services, announced today that it has entered into a definitive merger agreement with ADVO, the nation's leading direct mail media company, under which it will acquire all of the outstanding common shares of ADVO stock for $37 per share in cash in a merger. The fully financed transaction is valued at approximately $1.3 billion (on a diluted basis), including approximately $125 million in existing ADVO debt which Valassis expects to refinance. This acquisition will create the nation's largest integrated media services provider. The combination will feature the most comprehensive product and customer offering in the industry serving 20,000 advertisers worldwide, including 94 of the top 100 advertisers in the United States. The combined company will be positioned to capture growth across the expanded product and service portfolio, delivering customized, targeted solutions on a national, regional, zip code, sub-zip code and household basis. ADVO's shared mail distribution business penetrates up to 114 million households, or 90% of U.S. homes, adding substantially to Valassis' weekly newspaper distribution of over 60 million households. The combined company will have 7,900 employees with operations in nine countries. "Together, Valassis and ADVO will be well positioned for growth as a more diversified company with complementary capabilities, product offerings and clients," said Alan F. Schultz, Valassis Chairman, President and CEO. "We will have an unsurpassed ability to deliver value and savings to consumers where, when and how they want -- and to do so with advanced analytics and targeting capabilities that maximize advertisers' return on investment. This combination is a first in the media services industry and uniquely positions us to capture growth by anticipating the needs of the marketplace and evolving to meet them." S. Scott Harding, ADVO Chief Executive Officer, added, "Advertisers' needs are becoming increasingly sophisticated and require solutions that are both scalable and customized. Our new company will deliver on these requirements with an unrivaled portfolio of products, leadership across multiple media platforms, proven targeting expertise and unmatched reach. In today's media world, that is an undeniably attractive combination." Mr. Schultz continued, "We are very pleased to welcome ADVO into the Valassis family. This is an exciting opportunity for employees, clients and shareholders." Transaction Overview Valassis expects the transaction to be accretive in 2007 on a cash EPS basis, excluding estimated amortization of intangibles arising from purchase accounting. Annual cost synergies of approximately $40 million are anticipated to be achieved beginning in 2007. The combined company expects revenue of approximately $2.65 billion in calendar year 2007. EBITDA in 2007 for the combined company is anticipated to be between $305 million and $315 million. The combined company will be headquartered in Livonia, Mich., and maintain a substantial presence in Windsor, Conn. Mr. Schultz will remain Chairman, President and Chief Executive Officer and Mr. Robert L. Recchia will remain Chief Financial Officer. Mr. Harding will serve as a consultant to the combined company. The Valassis Board of Directors will remain intact. The merger agreement, which has been approved by the Boards of Directors of both companies, remains subject to the approval of ADVO shareholders, regulatory approvals and other customary conditions. The transaction is expected to close in three to four months. Valassis' financial advisors are Bear, Stearns & Co. Inc., who also provided committed financing for the transaction, with McDermott Will & Emery LLP as legal counsel. ADVO's financial advisors are Citigroup Global Markets, Inc. with Wachtell, Lipton, Rosen & Katz and Kirkpatrick & Lockhart Nicholson Graham LLP as legal counsel.