Published On: Thu, Jan 16th, 2014

Leon Black’s Apollo global Management Buying Chuck E Cheese for $983 Million


CEC Entertainment (NYSE: CEC) is a Texas based family dining and entertainment company that operates 577 Chuck E. Cheese entertainment centres for children, mostly around the United States. CEC today announced that it has entered into a definitive merger agreement with giant, New York based, hedge fund Apollo Global Management.

The two companies separately announced, by way of identical press announcements, that under the terms of the agreement Apollo will acquire CEC at a valuation of approximately US$1.3 billion, including the assumption of all the company’s outstanding debt.

Apollo will make a tender offer of US$54.00 per share in cash for all of the company’s outstanding common shares. This represents approximately a 25% premium over CEC’s share price immediately prior to media speculation commencing about a possible transaction just over a week ago, and approximately a 36% premium over the twelve months volume-weighted average price over the last twelve months, to the same point in time.

With 17.55 million shares outstanding presdently, the market capitalization at the offer price is approximately US$948 million. Since the announcement, the shares have been trading today at just above the offer price and are currently hovering around US$54.50 per share, up US$6 per share on the announcement.

The transaction has been approved unanimously by the CEEC Board of Directors, which recommends that shareholders should tender their shares to a formal tender offer that Apollo will now initiate.

Richard M. Frank, Executive Chairman of CEC says of the Apollo offer, “We are pleased to have reached this agreement with Apollo, which maximizes value for all of our shareholders, ““This transaction represents the successful conclusion of our extensive review of strategic alternatives.”

Translation; this is the best price they thought they could get, and puts the company into friendly hands.

“This transaction with CEC gives us the opportunity to partner with the proven leader in family dining and entertainment, ” said Scott Ross, Partner at Apollo Global Management. “Across the U.S., and increasingly around the world, the Chuck E. Cheese’s brand represents quality, safe and fun family entertainment.”

When the tender offer is made completion of transaction is conditioned upon, among other things, satisfaction of a minimum tender condition of more than 50 percent of the Company’s common shares, the receipt of the Federal Trade Commission’s approval under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, and other customary closing conditions.

The agreement also provides a “go-shop” provisions allowing Chuck E. Cheese to try and find a better offer if it can until January 29th, 2014.

In addition to the announcement of its pending acquisition by Apollo CEC also put in place today a standard edition shareholder rights plan, a.k.a. “poison pill”, offering a defense against other corporate raiders who may try to horn in on the deal, other than Apollo itself or other parties whom the Board of Directors should find may offer a proposal they consider superior. It is not clear if the company has any particular potentially adverse interests in mind here, or are just being careful.

In any case they are certainly getting the best, and the most expensive, advice on the street as Goldman Sachs are serving as their financial advisor. Deutsche Bank, Morgan Stanley and UBS are serving in turn as financial advisors to Apollo, and, together with Credit Suisse, have provided debt financing commitments for the deal to Apollo as well.

About Apollo Global Management

Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, London, Frankfurt, Luxembourg, Singapore, Mumbai and Hong Kong. Apollo had assets under management of approximately $113 billion as of September 30, 2013, in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources.

Apollo is Chaired by its founder Leon Black.


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