Sparks' Purchase of Showtime Approved

By Margo McCall -- Tradeshow Week, 3/21/2005

Showtime Enterprises will join Sparks Exhibits & Environments, now that a bankruptcy court judge has approved their merger.

Sparks, a subsidiary of the publicly traded Marlton Technologies, made a $7.6 million bid to purchase Showtime's assets and a portion of its debt when the competitor filed for Chapter 11 reorganization in January.

However, Lynch Exhibits threw a wrench in the works when it purchased a creditor's claim and gained standing to oppose the merger. Attorneys for Lynch, joined by the official committee of unsecured creditors, argued that Showtime failed to publicly market the company to prospective buyers before agreeing to the deal with Sparks.

Furthermore, at that time Lynch offered to make a higher offer for Showtime's assets. Yet even after U.S. Bankruptcy Court Judge Judith Wizmur sustained Lynch's objections, the company failed to make a competing bid. On March 4, Wizmur approved Sparks' purchase, which includes Showtime's assets and the claims of Argosy Investment Partners and the Small Business Administration.

"The courts decided it was fair in allowing the acquisition to go forward. I'm pleased with the way the process worked out," said Marlton Chairman Jeff Harrow, who noted that, despite the objection, the deal closed within the expected 30-day time frame.

Lynch CEO Mike Corrozza did not return calls seeking comment about why his company didn't submit a bid for Showtime after objecting to Sparks' purchase. Sig Tragard, the company's vice president of sales, said, "We're not commenting on the process of the transaction."

Now that the legal wrangling is over, Harrow said attention will turn to integrating Showtime employees and customers into the Sparks operation. "Integration is obviously the key to any of these deals," he said.

Showtime Enterprises, a company with $21 million in annual revenue and production facilities in Las Vegas and Paulsboro, N.J., is Marlton's second recent acquisition. Last August, the company spent $694,000 to buy Exhibit Crafts, a Los Angeles area exhibit manufacturer, and a 20-percent stake in Intl. Exposition Services, a tradeshow shipping and installation provider. The purchase allowed Marlton to move its San Diego office to Los Angeles, but cost it $1.1 million for employee relocation and termination expenses.

Sparks intends to retain Showtime CEO David Sudjian and Executive Vice President Harold Jensen, along with many of its employees. "We don't expect there to be much attrition, however, there's always some overlap," Harrow said.

He added that he and Marlton Vice Chairman Scott Tarte have together handled nine acquisitions over the years. "The people are really critical to these kinds of things. You need to make sure clients and people are very comfortable before you make any significant changes."

As Showtime's bankruptcy filing progressed through the courts, Harrow said, Sudjian and Jensen had to reassure customers that rumors of a company shutdown were untrue. Harrow said the "false accusations" were disconcerting. "It doesn't do well for the industry as a whole," he said.

Showtime wasn't the first exhibit design and production company to seek reorganization. Exhibit Dynamics of Grand Prairie, Texas, filed for Chapter 11 in early 2004, leaving vendors and its financial backer owed more than $30 million. An unrelated Atlantic City firm called Showtime Exhibit Builders also filed for bankruptcy in early 2004.

In addition, for a number of consecutive quarters, Exhibitgroup/Giltspur, a subsidiary of the publicly traded Viad, has warned that new-exhibit construction orders have yet to recover from the recession.

Despite that, Harrow said he's optimistic about the exhibit-design business. Sparks, he said, has received some new-construction orders from existing clients who'd been delaying new builds. But the company is also trying to reach out to new customers and offer services beyond exhibit design and production.

"We had a great year in '04 and the budget looks strong in '05," he said. "With the Showtime deal coming together, it's that much more exciting and positive."