News

Chuck E Cheese will go public after merger

April 8, 2019

Chuck E. Cheese and Peter Piper Pizza parent company, CEC Entertainment, said today that it's going public again after merging with Leo Holdings, a company that specializes in IPOs. The new New York Stock Exchange listing will use the ticker CEC by the time everything becomes official this summer, a news release said. 

Leo Holdings is a so-called special purpose acquisition company and will merge with CEC to take it public. Following the closure of the deal, the owner of CEC Entertainment — Queso Holdings — plans to change its name to Chuck E. Cheese Brands, with CEC Entertainment as a subsidiary.

"I am extremely proud of everything that we have accomplished at CEC, and we are pleased to be seeing significant momentum in recent same-store sales trends," CEC Entertainment CEO Tom Leverton, said in the release.  "The executive team is eager to work with Leo as we continue to aggressively pursue opportunities in the next stage of our Company's evolution. Our future growth plans are based on enhancing the total guest experience, unlocking operational investments, growing and upgrading our venues, and opportunistically pursuing M&A initiatives."

Apollo Global Management took Chuck E. Cheese's parent company private nearly five years ago when it acquired the company for $948 million, and through the current deal will keep a majority stake in the new company. 

Last year, CEC reported net sales of $896 million from 750 Chuck E. Cheese and Peter Piper Pizza locations. 

Through the proceeds from the deal announced today, CEC Entertainment will pay on its approximately $978.9 million in outstanding debt.  This transaction will reintroduce CEC to the equity capital markets as a publicly listed company with an anticipated initial enterprise value of approximately $1.4 billion or 7.5 times the company's estimated 2019 adjusted EBITDA of approximately $187 million. 

The boards of both Leo and Queso have unanimously approved the proposed transaction. Completion of the transaction is subject to Leo shareholder approval and other customary closing conditions and is expected in the second quarter of this year. 

"Having had almost 30 years of experience of investing in the consumer sector, it is clear to me that the iconic Chuck E. Cheese brand is a part of Americana,"  Leo Holdings Corp. Chairman and CEO Lyndon Lea, said in the release. "Rarely do brands possess such rich heritage and imbue such fond memories across generations. In CEC we have secured an extremely attractive acquisition. Not only because of the strength of the brand but the financial characteristics of low-risk growth through existing site refurbishments, 20% Adjusted EBITDA margins and high cash flow conversion make for a compelling investment. 

"The opportunity becomes even more convincing when coupled with the fact that the business has proven resiliency as evidenced by its performance during the last three economic downturns. The acquisition of CEC strongly fulfills the mandate of the Leo shareholders and does so at an attractive valuation. Furthermore, I look forward to partnering with Tom Leverton and his team along with Apollo as we continue to evolve the Chuck E. Cheese business model into the future."