Haymaker “cruising” to the finish line?

Haymaker Acquisition Corp. (HYAC), announced Thursday evening that they have entered into a definitive agreement with OneSpaWorld (“OSW”), a global provider of health and wellness products and services onboard cruise ships and in destination resorts around the world, with the transaction being valued at $948 million.  OSW is being sold by Steiner Leisure Limited (“Steiner”), a portfolio company of L Catterton, a global consumer-focused private equity firm.

OSW’s facilities and staff offer guests a comprehensive suite of premium health, fitness, beauty, and wellness products and services onboard 161 cruise ships and at 66 destination resorts globally.

Quick takes:  This transaction is right up Steven Heyer’s alley (the CEO & Chairman of Haymaker), having a ton of experience in consumer and consumer related products via Outback Steakhouse, Starwood Hotels & Resorts and Coca-Cola.   Furthermore, the PIPE is being done at $10.00 (good), and it’s in a category that has enjoyed consistent growth and one in which OneSpaWorld dominates (84% market share). But are they getting this company at a discount?  Well, that slide is pretty hard to interpret. If the point was to obfuscate, then they succeeded.  It’s difficult to make heads or tails of it if you do not have any depth in this category (slide 35).  However, health & wellness is an attractive and growing segment and OneSpaWorld is clearly the market leader.

By way of background, OneSpaWorld (originally Steiner Leisure Ltd.) was acquired via buyout by L Catterton, in 2015 for $925 million. Steiner Leisure was then split into One Spa, Cortiva Institute (which trains masseuses and skin-care professionals), and product lines such as Elemis and Ideal Image.

Additionally, it’s interesting that for a company called “OneSpaWorld”, all of senior management is made up entirely of men and they don’t look like they visit the spa on the regular. Well, maybe Glenn.

Regardless, there is a conference call scheduled for investors on Friday morning at 9:00AM.  Transaction and call-in details below:

INVESTOR CONFERENCE CALL

Friday, November 2, 2018 at 9:00AM (ET), Haymaker will be holding an investor conference call to discuss the transaction.

November 2, 2018 Call
Domestic: 1-(855) 327-6837
International: 1-(631) 891-430

Replay
Domestic: (844) 512-2921
International: (412) 317-6671
Replay Pin number: 10005849

HIGHLIGHTS:

• OSW curates and delivers an offering of health and wellness products, technologies and services onboard 161 cruise ships and at 66 destination resorts around the world.
• Cruise Industry News projects continued momentum, with berths growing at a 5.6% CAGR, from approximately 535,000 in 2017 to 704,000 through 2022.
• Over 80% market share in the outsourced maritime health and wellness market, OSW is 10x the size of its closest competitor.
• OSW maintains a unique asset-lite business model with annual capital expenditures approximating 1% of revenue, and a sustainable low cash tax rate due to a majority of its profits being earned in low-tax and no-tax-jurisdictions.
• OSW’s growth is expected from planned new ship launches by current cruise line partners, increased market share via partnerships with new cruise lines, proven, technology-enabled onboard revenue growth initiatives, continued innovation and expansion of its service and product suite, and accelerating growth of its health and wellness facility footprint at destination resorts worldwide.
• The combined company will be led by OSW’s current management team, which operated Steiner for nearly 20 years while it was a public company.
• OSW expects to generate approximately $535 million in revenue and over $26 million in Pro Forma Adjusted Net Income in 2018.
  • For 2019, the Company forecasts revenue of over $570 million and approximately $33 million in Pro Forma Adjusted Net Income, reflecting over 23% growth in Pro Forma Adjusted Net Income.

THE BUSINESS COMBINATION

Dory US Merger Sub will merge with and into Haymaker, with Haymaker as the surviving company in the merger. As a result:

• Haymaker will become a wholly-owned subsidiary of OSW Holdings.
• Each share of Class A common stock of Haymaker (the “Class A Shares”) and each share of Class B common stock  of Haymaker (the “Founder Shares”) shall be cancelled and converted into the right to receive one common share of OSW Holdings (the “OSW Holdings Shares”).
• The warrants to acquire Class A Shares shall be restated and converted into OSW Holdings Private Warrants.

CONSIDERATION

• 16,540,363 OSW Holdings Shares (valued at approximately $165,403,630 based on a $10.00 share price)
• 1,901,287 OSW Holdings Private Warrants
• $717,096,370 in cash
• The right to receive up to an additional one million OSW Holdings Shares upon the occurrence of certain events.
• To the extent that interest on the amounts in Haymaker’s trust account, as of immediately prior to the closing of the Business Combination (without giving effect to any redemptions), plus $400,000, and less the sum of redemptions in excess of $50.0 million, is greater than zero, such amount will increase the cash consideration to the Sellers at the closing of the Business Combination and correspondingly decrease the OSW Holdings Shares to the Sellers.
  • To the extent that certain Haymaker transaction expenses are less than $35.0 million, certain deferred shares may instead be issued at the closing of the Business Combination.

EFFECTS TO THE SPONSOR 

• Each Haymaker unit will be cancelled in exchange for consideration consisting of the right to receive (A) one fully paid and non-assessable OSW Holdings Share, and (B) one OSW Holdings Public Warrant;
• The 8.25 million Founder Shares issued to Sponsor prior to Haymaker’s initial public offering will be converted into 3.00 million OSW Holdings Shares and the right to receive 2.00 million OSW Holdings Shares upon the occurrence of certain events;
• Each of the warrants issued to the Sponsor at the time of Haymaker’s initial public offering (the “Founder Warrants”) will be restated and become exercisable for one OSW Holdings Share, on the same terms and conditions as those applicable to the Founder Warrants (the “OSW Holdings Private Warrants”); and
• The Sponsor will forfeit 3.25 million OSW Holdings Shares and 5,006,581 OSW Holdings Private Warrants.

PIPE

• 12,249,637 OSW Holdings Shares and 3,105,294 OSW Holdings Private Warrants for gross proceeds of approximately $122,496,370 million (at $10.00)

SECONDARY PURCHASERS

• The Secondary Purchasers (Steiner Leisure and Dory Parent) will purchase an aggregate of 5,607,144 OSW Holdings Shares from Steiner Leisure on the first business day after the closing of the Business Combination at $10.00.

ADVISORS

• Goldman Sachs & Co. LLC and Lazard are serving as financial advisors to Haymaker.
• Cantor Fitzgerald is serving as capital markets advisor to Haymaker.
• Goldman Sachs & Co. LLC is serving as private placement agent.
• DLA Piper LLP (US) and Ellenoff Grossman & Schole LLP are serving as legal advisors to Haymaker.
• Nomura and BofA Merrill Lynch are serving as financial advisors and capital markets advisors to OSW.
• Kirkland & Ellis LLP is acting as legal advisor to OSW.