OneSpaWorld Investor Opposes Funding It Says Rewards Insiders

(Bloomberg) -- A OneSpaWorld Holdings Ltd. investor is calling on shareholders to vote down a plan to raise $75 million through a private placement, arguing it would be highly dilutive and reward insiders at the expense of other holders.

Deep Field Asset Management LLC owns roughly a 2.8% stake in OneSpaWorld, which provides health and beauty services to cruise lines and resorts. Deep Field argued in a letter to shareholders Wednesday that, even with the coronavirus pandemic, tourism- and cruise-related businesses have accessed capital at much better terms than those negotiated by OneSpaWorld.

“The right thing to do would be for management and the board to tear up this insider scheme,” Deep Field managing partner Jordan Moelis said in the letter, a copy of which was obtained by Bloomberg. “If they decline to do so, then as shareholders we do not have to vote as though we are still in the darkest days of early April.”

The plan will need the support of a majority of the votes cast at a meeting set for June 10. Moelis said that because insiders hold about 20% of the company’s shares, support from a majority unaffiliated shareholders should be required to proceed. Four of the five members on the board’s special committee that reviewed the deal plan are participating in the transaction, he said.

“This gives a new meaning to the word ‘special’ in ‘special committee,’” he said.

A representative for OneSpaWorld wasn’t immediately available for comment.

OneSpaWorld said last month that it planned to issue common stock and warrants to Steiner Leisure Ltd., an affiliate of private equity firm L Catteron, and its partners, including Neuberger Berman Group funds and members of the OneSpaWorld’s board and management. OneSpaWorld said the proceeds from the private placement would bolster its balance sheet and liquidity and sustain operations even with a lengthy shutdown of the cruise industry.

L Catteron has a long history with OneSpaWorld. In 2015, a group led by L Catteron acquired the business when it closed a deal to take Steiner Leisure private. OneSpaWorld went public last year through a reverse merger with Haymaker Acquisition Corp., a special purpose acquisition company.

Under the terms of the private placement, OneSpaWorld said it would raise $75 million by selling 18.75 million shares at about $4 a share, along with 5 million warrants at $5.75 per share. Moelis challenged the company’s assertion that it represented a 5% premium on the company’s 20-day volume weighted average of its shares. He also argued that it ascribes no value to the warrants, which he says would actually indicate that the deal was done at a 20% discount.

Carnival Corp., Royal Caribbean Cruises and Norwegian Cruise Line Holdings have raised billions of dollars in recent weeks. Deep Field itself offered on two occasions to participate in any capital raises that may be required at OneSpaWorld, Moelis said.

OneSpaWorld’s shares have fallen 67% this year, giving the company a market value of about $343 million.

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