So Leon Black, was it the pizza or the activities that attracted you to Chuck E. Cheese’s?
The investor’s Apollo Global Management on Thursday reached a deal to buy the family “entertainment” chain for $1.3 billion — a 25 percent premium to the share price before media speculation about a pending sale.
Whether it was the pizza or the arcade games, Black believes Apollo can buff up the 36-year-old, somewhat tired 575-unit chain that saw same-store sales slip a few percentage points last year.
Apollo will look to pare costs in order to improve profit margins, a source said, noting that Chuck E. Cheese’s is open for lunch on school days — when its key demographic isn’t there.
The publicly traded chain throws off roughly $90 million in annual free cash flow.
Apollo has committed to putting down up to $335 million in the leveraged buyout. It will borrow the rest.
Apollo stands to almost double its money in three to four years if the company holds steady, one source noted.
Rival suitors have until Jan. 29 to put in competing offers. Apollo made a first round bid in the auction to buy CEC Entertainment, the chain’s parent, and was never asked to make a second round offer, the source said.
That likely indicates it was the only serious suitor.
CEC shares closed Thursday at $54.75, slightly above the $54 offer price.