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    Chuck E. Cheese’s $1.4B Plan to Go Public Collapses

  • The deal, which was supposed to close during Q3 2019, has been terminated.

    flickr: Mike Mozart
    Following the merger, CEC expected to have an enterprise valuation of $1.4 billion.

    A deal to bring Chuck E. Cheese’s parent company, CEC Entertainment, public again has fallen through. 

    Leo Holdings Corp., a publicly traded special purpose acquisition company, and Queso Holdings Inc., the parent company of CEC, along with Queso’s controlling stockholder, Apollo Global Management, jointly terminated the deal on July 30. 

    In April, CEC, which also owns and operates Peter Piper Pizza, announced the deal to bring the company public for the first time in four years. Following the merger, CEC expected to have a $1.4 billion enterprise valuation or seven-and-a-half times the company’s estimated 2019 adjusted EBITDA of about $187 million. 

    The 750-unit company also planned on using $300 million in cash from Leo for debt. As of December 30, CEC  had $978.9 million in outstanding debt, per company filings. It’s unclear now how CEC will handle this debt without funding from Leo. 

    While the merger would have allowed financing from Leo to help fund expansion and decrease outstanding debt, CEC’s performance over the past year proves the company is thriving under Queso and Apollo. 

    “Since Apollo first acquired the company in 2014, CEC has made significant capital investments in PlayPass technology, store remodels, and the rollout of the All You Can Play initiative which have positioned CEC for tremendous continued growth opportunities going forward,” said Andrew Jhawar, senior partner and head of the consumer and retail group at Apollo and chairman of the board at CEC Entertainment.

    During Q1, CEC dedicated $4.9 million to growth initiatives and $13.3 million to game enhancements and venue maintenance. Leverton said the investments are being planned strategically and will lead to further profitability down the road.

    These strategic initiatives were rolled out in late 2018 and have helped CEC to mark five straight quarters of increases in same-store sales. The company is also on track to hit its goal of 60 remodels by the end of 2019. 

    “We generated our fifth consecutive quarter of comparable venue sales growth due to the positive impact of the All You Can Play game packages and More Tickets initiatives despite the estimated 1.8 percent negative impact from the shift of Easter and the corresponding timing of Spring Breaks in the second quarter 2019 versus the first quarter 2018. Through the first half of 2019, our comparable venue sales growth was an impressive 4.5%,” Tom Leverton, chief executive officer of CEC, said in a statement.

    • Q2 2019: 0.4 percent 
    • Q1 2019: 7.7 percent
    • Q4 2018: 3.3 percent
    • Q3 2018: 2.2 percent
    • Q2 2018: 1 percent

    Neither CEC or Leo gave an explanation for the termination of the deal.