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Twelve Seas Investment Company II (TWLV) to Combine with Crystal Lagoons

Twelve Seas Investment Company II (TWLV) to Combine with Crystal Lagoons

Twelve Seas II (NASDAQ:TWLV) has signed a definitive agreement to combine with aquatic entertainment firm Crystal Lagoons for $350 million in share compensation.

Miami-based Crystal Lagoons has developed the technology to construct large pool-like water features for resorts and entertainment venues.

The combined company is expected to trade on the Nasdaq once the deal is completed with an initial outside date set for May 31.

Transaction Overview

Twelve Seas II has about $14.2 million in its current trust having seen 96% of its shares redeemed in two earlier extension votes, the latter of which gave it the ability to push its deadline to up to June 2 without another vote.

Crystal Lagoons is to receive 35,000,000 shares as consideration in the merger and Twelve Seas II may seek to add PIPE funding of some kind to the transaction. It must maintain more than $5 million in cash available in order for the deal to close.

Farallon Capital Management has agreed as a part of the merger agreement to provide a $58 million first lien term loan facility to the combined company and a $65 million uncommitted accordion to this facility at close.

The company stands to potentially receive up to 1,225,000 in additional shares split evenly between two earnout targets. The first half would disperse if the company trades with a VWAP for 20 of 30 days at or above $15 within three years of close and another half at $17.50 within four years.

Twelve Seas II’s sponsor has agreed to forfeit 6,625,000 promote shares (76.8%) and will foot half the cost of any warrant exchange offer up to $2 million. It will also transfer 500,000 shares to the combined company if necessary to pay any excise tax expenses.

Crystal Lagoons shareholders are subject to a 180-day lock-up. The company’s post-transaction Board is to consist of four directors designated by Crystal Lagoons and two chosen by Twelve Seas II.


Quick Takes: Twelve Seas II squeaked this transaction just barely into the 2023 calendar by announcing it in the afternoon of the final trading day of the year, December 29.

That’s generally a move to avoid too much notice of an announcement, but the two sides may want to pick up some buzz for the transaction as the waters warm and they work towards close.

Vacationers don’t need to wait for summer to take a dip into Crystal Lagoons, however, as they are already taking the plunge in both hemispheres.

It is in fact still summer where Crystal Lagoons made its first big splash in 2006 with the San Alfonso del Mar project in Santiago, Chile. The 20-acre beachfront lagoon area that the company made for the resort holds 250 million liters of filtered seawater and was briefly the largest swimming pool in the world.

This record was beaten by another Crysal Lagoons project in 2015 – the Citystars Sharm El Sheikh lagoon in Egypt that spans over 1 million square feet. Just for good measure, the company also built the world’s third-largest in Thailand as well.

Crystal Lagoons counts a total of about 1,000 projects overall that are in some form of completion or early development and it holds the patent for the crystalline structure needed to make its design work in about 190 countries.

It licenses this intellectual property for each individual project and handles the planning with ongoing revenue generated from supervising maintenance, training and software that controls each lagoon’s chemical levels and conditions.

The parties have not yet shared any financials for the company, but at one point the company quoted project prices at about $160,000 per acre for construction and $1,600 in monthly maintenance costs per acre. For its record-holding Egyptian pool, this translates to about $3.8 million to dig it and $38,240 in monthly overhead.

It is unclear what Crystal Lagoon’s take on those costs would be, but by now it has built a large enough project portfolio to generate significant recurring revenue.

It is now looking to forward a more standardized approach with its Public Access Lagoon (PAL) model that would be roughly 4 acre lagoons that could be packaged and surrounded by other amenities and infrastructure.

It has pursued that model far and wide, even agreeing to launch a PAL project in Palestine in 2022 as a part of its “More Fun Palestine” initiative. It also has begun investigating other use cases for its technology in industrial cooling systems or hydroelectric power stations.

Overall, hospitality companies have done well as SPAC targets recently. With Isos target Bowlero (NYSE:BOWL) last closing above $14, and Falcon’s Beyond (NYSE:FBYD) at $12.30 about three months out from its close with Fast II.


ADVISORS

  • Company Advisors:
    • EarlyBirdCapital is acting as financial advisor and capital markets advisor
    • Greenberg Traurig, LLP is acting as legal counsel
  • SPAC Advisors:
    • Ellenoff Grossman & Schole LLP is acting as legal counsel