Buyer Found For Barton Cotton
April 7, 2009 Mark Hrywna
Barely 10 weeks after Barton-Cotton filed for Chapter 7 bankruptcy, the direct marketing company could be back in business.
Jim Moore, CEO of Tulsa, Okla.-based ResourceOne, is expected to acquire the assets of Barton-Cotton for $3.6 million and plans to hire back many of the former employees by April 20. Moore formed a new company, BC Acquisitions, that will acquire the operating assets and take on the Barton-Cotton name.
The sale would include an option to purchase two manufacturing facilities, but no cash or accounts receivable, according to Mark Friedman of Baltimore-based DLA Piper, the court-appointed bankruptcy trustee.
Friedman filed a motion April 2 in United States Bankruptcy Court for the District of Maryland authorizing the sale after an agreement was reached last week. A court hearing is scheduled for Wednesday, April 15 to approve the transaction.
Barton-Cotton would become a sister company of ResourceOne, a direct mail and communications firm, and Broomfield, Colo.-based ResourceOne Technologies, a software development company launched about six years ago.
Moore plans to exercise an option to purchase two Barton-Cotton buildings in Baltimore, one for $1.984 million on Parker Road and another for $1.216 million on Constance Avenue, which would make the entire transaction some $6.8 million. Barton-Cotton would continue to operate out of the same Maryland facilities while moving the corporate offices back to the Parker Road location, Moore said.
Moore, who will serve as interim CEO until a permanent one is hired, said he has already talked to most of the primary players in Barton-Cotton’s fundraising and affinity divisions. He anticipates roughly the same number of employees, about 200, who were with the firm before the bankruptcy filing.
Barton-Cotton’s biggest division is fundraising, in addition to its Affinity business and Religious Product Services (RPS). Initially, Friedman had planned to divide Barton-Cotton and sell it off in parts by mid-March. A bid solicitation letter was sent to six parties and Friedman received replies from five, conveying 14 bids in various combinations of the business divisions and real estate. “At one time we were thinking about looking to some division but it was always considered to be easier to sell it to one buyer,” he said.
Negotiations on offers for Barton-Cotton’s fundraising division and the Affinity/RPS divisions fell through and after another prospective buyer backed out for the fundraising division, Friedman received the $3.6-million proposal from Moore. “Our preference was always to try to sell the operating business,” he said, adding that Moore had the most interest from the beginning.
Friedman, the bankruptcy trustee, expressed appreciation for the nonprofits that worked with him in conjunction with getting their mailings completed since the time of the bankruptcy filing in February. Roughly 40 Barton-Cotton employees have been working the past several weeks to fulfill previous commitments and contracts.
Moore described Barton-Cotton as “an incredible name with a long history of serving their clients. It’s a great opportunity for us to partner with that group of people,” he said.
“Barton-Cotton will be offering more products than they ever have, with a wider sales force than before because our companies will be helping sell some of the products Barton-Cotton offered,” Moore said.
Barton-Cotton approached ResourceOne Technologies two years ago about a marketing arrangement to offer the software to its clients, Moore said. “That’s how we came to know them,” he said.
“The key strategy and creative people that were there with Barton-Cotton have pretty much expressed an interest in staying on, and we feel will have the continuity to stay on,” Moore said. “We expect great things from the company.”
A member of the National Catholic Development Conference (NCDC), ResourceOne has about 200 to 300 nonprofit clients, roughly 60 percent of its business, Moore said. Among its nonprofit clients are St. Joseph’s Indian School, The Salvation Army, American Legion and Oblate Missions. The firm provides services that include direct mail, printing, packaging, data management, call center, fulfillment and fundraising.
Barton-Cotton filed liquidation paperwork on four companies: Barton-Cotton Inc., Barton-Cotton Sales Corp., Barton-Cotton Holding Corp., and Barton-Cotton Real Estate Inc.
The NonProfit Times broke the story regarding the bankruptcy Feb. 9 on nptimes.com after obtaining a copy of a letter sent to at least some of Barton-Cotton’s creditors by the Bank of Montreal in Chicago. The letter notifies the recipient that the bank is “a secured creditor of the Debtor,” which it identifies as Barton-Cotton, Incorporated. The bank identifies itself as “Agent.”
According to the bank’s letter, “the Debtor has defaulted on the obligations the Debtor owes to Agent. Agent is therefore entitled to collect all outstanding accounts receivable, general intangibles, rights to payment, and contract rights of the Debtor.”
The filing for Barton-Cotton Inc. reported assets of less than $50 million and liabilities between $50 million and $100 million. Barton-Cotton Holding Corp. and Barton-Cotton Sales Corp. both reported less than $50,000 in assets and liabilities of from $50 million to $100 million. Barton-Cotton Real Estate Inc. reported assets of less than $10 million and liabilities between $100 million and $500 million.
At least 83 percent of Barton-Cotton is owned by American Capital Strategies, a company publicly-traded on NASDAQ under ACAS. The firm paid $144 million for Barton-Cotton in April 2006, announcing the deal on May 2. In filings with the Securities and Exchange Commission, American Capital reported $62.7 million in debt tied to Barton-Cotton. The firm’s fair value was estimated to be $12.4 million.
In December, American Capital announced that it was implementing various cost saving measures in response to economic and market conditions and that the changes would affect both American Capital and its wholly‑owned European affiliate, European Capital Financial Services Limited.
American Capital, including its global fund management business, has approximately $17 billion in capital resources under management and more than 290 portfolio companies.