(Adds background on Great Wolf)
Jan 16 Apollo Global Management LLC said
it will buy CEC Entertainment Inc, 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
CEC shares exchanged hands at $54.51 in early afternoon
trading on Thursday, suggesting some investors expect a higher
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 Jan. 7 when first
reports of a possible deal emerged.
Including debt, the deal is valued at $1.30 billion, the
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 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 and
casino company Caesars Entertainment Corp.
CEC, which is mostly owned by investment firms, has until
Jan. 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, 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
Weil, Gotshal & Manges LLP are CEC's legal advisers, while
Wachtell Lipton, Rosen & Katz and Paul, Weiss, Rifkind, Wharton
& Garrison LLP are advising Apollo.
(Reporting by Siddharth Cavale, Chris Peters and Sakthi Prasad
in Bangalore; Editing by Supriya Kurane, Saumyadeb Chakrabarty
and Cynthia Osterman)