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Apollo to Buy Chuck E. Cheese Operator for $1.3 Billion

Jan. 16 (Bloomberg) -- CEC Entertainment Inc., owner of the Chuck E. Cheese restaurant chain, agreed to a takeover by an affiliate of Apollo Global Management LLC in a transaction valued at $1.3 billion, including debt.

Apollo will pay $54 a share in an all-cash deal, Irving, Texas-based CEC said today in a statement. That’s 25 percent more than the closing share price on Jan. 7, before media reports of the transaction, the companies said. The offer is also 36 percent more than the 12-month volume-weighted average of the stock’s price as of Jan. 7, they said.

Chuck E. Cheese restaurants, which have rides and games for children along with pizza, sandwiches and chicken wings, have struggled to attract American consumers amid shaky consumer confidence. Sales at the company have declined in seven of the last nine quarters and fell 0.3 percent to $195.9 million in the three months ended Sept. 29.

The shares jumped 13 percent to $54.75 at the close in New York, indicating some investors expect competing bids. CEC gained 33 percent last year, while the Standard & Poor’s 500 Index increased 30 percent. The company said in a separate statement today that the sale plan doesn’t prevent a superior proposal from another bidder.

The deal, unanimously approved by CEC’s board, “recognizes the value of CEC’s global brand, strong cash flows and growth prospects while providing our shareholders with an immediate and substantial premium,” Chief Executive Officer Michael H. Magusiak said in the statement. “Apollo brings significant industry expertise and financial resources.”

Birthday Sales

Third-quarter revenue was hurt by lower birthday party sales, more competition from kids’ movies and economic and political uncertainties, Magusiak said during a conference call on Oct. 31.

CEC also said in October that it plans to open as many as 15 company-owned stores in 2014, including three outlet relocations and one franchise acquisition, with capital spending projected at $70 million to $75 million.

Of the 577 Chuck E. Cheese stores, the company owns and operates 522.

To contact the reporters on this story: Tom Lavell in Frankfurt at tlavell@bloomberg.net; Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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