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Chuck E. Cheese owner agrees to $950M buyout

By Star-Advertiser staff and Associated Press

LAST UPDATED: 08:50 a.m. HST, Jan 16, 2014

NEW YORK » The parent company of the Chuck. E. Cheese restaurant chain has agreed to be acquired by an affiliate of Apollo Global Management for about $950 million.

Founded in 1977, Chuck E. Cheese restaurants are known for their mix of games, play areas and robotic characters that provide musical entertainment. The chain has been struggling to lift sales, even after a makeover for its rodent mascot in 2012 that was intended to refresh its outdated image.

Enter Leon Black's investment firm Apollo, which buys troubled companies using borrowed money and tries to sell them for more, usually years later, in a transaction known as a leveraged buyout.

The companies say Apollo will pay $54 per share for CEC Entertainment Inc. That's about a 25 percent premium over CEC's closing price on Jan. 7, the last trading day before media speculation regarding a transaction, the companies noted. They put the deal's value at about $1.3 billion, including debt.

CEC has approximately 17.6 million outstanding shares, according to FactSet.

CEC may seek out superior proposals from limited third parties until Jan. 29. The company, which announced today that it adopted a shareholder rights plan, had been reviewing its strategic options. A shareholder rights plan, also known as a "poison pill," is commonly used by businesses to try to ward off hostile takeover attempts.

CEC said its shareholder rights plan was implemented to help its board "in overseeing a fair and orderly process" and to maximize shareholder value during a sale of the company. CEC said its rights plan won't prevent or restrict any person from making a superior bid.

CEC and its franchisees run 577 Chuck. E. Cheese locations in 47 states and 10 foreign countries or territories.

The two Hawaii locations both are on Oahu, at 1199 Dillingham Blvd. in Kalihi, and at 850 Kamehameha Hwy. in Pearl City Shopping Center.

The restaurant was founded by Nolan Bushnell, one of the founders of the video-game company Atari. Its mascot has undergone various changes over the years; at one point, its personality was depicted as a "lovable thug" from New Jersey that sometimes held a cigar, according to fan site ShowBizPizza.com.

CEC said its board unanimously approved the transaction. The company's shares were up $6.04, or about 12 percent, at $54.47.

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lokela wrote:
They need to upgrade their facilities to reflect the sign of the times. Nothing has changed much for Chucky over the years.
on January 16,2014 | 05:33AM
krusha wrote:
I guess this is the beginning of the end for that company before it gets liquidated later...
on January 16,2014 | 05:52AM
seaborn wrote:
I'd sell it too, and quickly. Chuck E. Cheese's play area is a disgusting, germ-infested zone. I took my kids to it ONCE when they were little, and was totally disturbed by the nasty tunnels and ball pit areas. Sick kids wipe their runny noses with their hands and crawl through the tunnels, and throw the balls in the ball pit. I saw a kid sneeze on the viewing window in the tunnel, and another kid put his hand on it when trying to hold himself up to look out. Kids with leaky, dirty diapers crawl through their leaving trails for other kids to contact and spread. No matter how Chuck E. Cheese tries to explain their tunnel and ball pit cleaning procedures and schedules, the entire set-up is gross and unsanitary.
on January 16,2014 | 09:58AM
NanakuliBoss wrote:
So funny, Swiss Cheese pervert taken into custody in News alert below. Was his name Chuck?
on January 16,2014 | 01:06PM
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