Apollo Global Management LLC (APO.N) said it will buy CEC Entertainment Inc CEC.N, the parent of Chuck E Cheese restaurant chain, for about $948 million, adding to a portfolio that includes companies ranging from cruise ship operators to casinos.
The fund controlled by billionaire Leon Black will pay $54 per share for CEC, a premium of 11.5 percent to the stock's Wednesday closing.
CEC shares exchanged hands at $54.51 in early afternoon trading on Thursday, suggesting some investors expect a higher offer.
Apollo previously faced a bidding war with another private equity firm, KSL Capital, in 2012 for indoor water park operator Great Wolf Resorts. Apollo ended up winning the battle after raising its bid several times.
CEC stock has risen 12 percent since January 7 when first reports of a possible deal emerged.
Including debt, the deal is valued at $1.30 billion, the companies said.
Chuck E Cheese restaurants, hugely popular with kids, feature video games, bumper cars and play areas and offer food such as pizzas and sandwiches.
CEC was founded in 1977 by Nolan Bushnell, the founder of pioneering video game company Atari and one of the first bosses of Apple Inc (AAPL.O) founder Steve Jobs.
Apollo's offer for CEC comes on the heels of the investment firm's sale of CKE, the restaurant group that owns burger chains Carl's Jr and Hardees, to Roark Capital Group in November for about $1.70 billion.
Apollo owns accessory and jewelry maker Claire's Inc, which it filed to take public in 2013. It also holds large stakes in cruise operator Norwegian Cruise Line Holdings Ltd (NCLH.O) and casino company Caesars Entertainment Corp (CZR.O).
CEC, which is mostly owned by investment firms, has until January 29 to seek better offers.
Separately, CEC adopted a poison pill with a 10 percent trigger but said this would not prevent it from scouting for a superior offer under the terms of the deal with Apollo.
The Irving, Texas-based company reported a weaker-than-expected quarterly profit in October, hurt by a 2.1 percent drop in same-restaurant sales.
Reuters reported last week that CEC was working with Goldman Sachs Inc (GS.N), exploring a potential sale to private equity.
Goldman Sachs is advising CEC, while Apollo's financial advisers are Deutsche Bank Securities, Morgan Stanley and UBS Securities.
Weil, Gotshal & Manges LLP are CEC's legal advisers, while Wachtell Lipton, Rosen & Katz and Paul, Weiss, Rifkind, Wharton & Garrison LLP are advising Apollo.