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Chuck E. Cheese Buyout: Chain Changes Hands in $950M Deal

Image: Chuck E. Cheese Buyout: Chain Changes Hands in $950M Deal

By Morgan Chilson   |   Thursday, 16 Jan 2014 03:54 PM

CEC Entertainment, which owns the Chuck E. Cheese chain, has agreed to a buyout to sell the beleaguered chain for $950 million to Apollo Global Management.

The CEC chain has been suffering from dropping sales, and even a 2012 makeover of its singing rodent mascot didn’t help. Apollo is in the business of buying distressed companies, often in leveraged buyouts that result in a resale a few years down the road.

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Apollo will take over the company, which has 577 restaurants in the U.S. and abroad.  Then company management will take on the challenge of turning Chuck E. Cheese around, said USA Today.

Chuck E. Cheese’s singing robotic animals and videogame theme was born in 1977, and some experts told USA Today that profits slid because the company failed to evolve to meet the needs of today’s kids and parents.

“While Chuck E. Cheese has left a mark on American culture, it appears to have lost its way,” Jason Wright, in marketing with the VIA Agency, told USA Today. “They never seem to update, revise, or re-brand.”

USA Today compared CEC with Disney, which has done a good job at meeting the needs of both parents and kids. CEC, instead, may get kids excited about a raucous good time, but parents tend to be reluctant to spend a couple of hours in the loud restaurant environment, shelling out coins to keep games going.

“Parents don't enjoy it so much — so it's hard to get them in the door," Lynne Collier of the investment firm Sterne Agee told USA Today, adding that the key may be in providing entertainment for the parents. “But it's a good brand — it's not completely broken.”

That’s what Apollo is betting on. The company will pay $54 per share for CEC Entertainment, which works out to about 25 percent over the stock’s closing price as of Friday. CEC can still go looking for better offers through Jan. 29.

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