Apollo Said to Be in Talks to Sell Chuck E. Cheese Chain to Ares

  • Buyout firm said to seek about $2 billion for kid pizza chain
  • Apollo said to pursue back-up IPO plan in case sale stalls
Photographer: Roberto Machado Noa/LightRocket via Getty Images

The owner of Chuck E. Cheese is in talks with investment firm Ares Management LP over a sale that could value the children’s pizza and arcade chain at about $2 billion, people with knowledge of the matter said.

Ares is negotiating with owner Apollo Global Management LLC over the precise valuation, said the people, who asked not to be identified because they weren’t authorized to speak publicly. Bain Capital, Hellman & Friedman and Warburg Pincus dropped out of the bidding process over pricing, the people said. It’s unclear whether other parties are also negotiating with Apollo.

Apollo hired Deutsche Bank AG and Credit Suisse Group AG to run an auction process for Chuck E. Cheese, with the $2 billion valuation equating to about nine times the company’s earnings before interest, taxes, depreciation and amortization, the people said. Apollo has retained Jefferies Group LLC to run an initial public offering of the company should it opt against a sale, the people said.

No deal has been reached and the the talks may not lead to an agreement, they said.

Spokesmen for Apollo, Bain, Hellman and Warburg declined to comment. Representatives for Ares and Chuck E. Cheese didn’t respond to emails seeking comment.

Apollo agreed to take Irving, Texas-based Chuck E. Cheese private for about $1.3 billion in January 2014, according to data compiled by Bloomberg. The chain known as a children’s birthday party destination is led by Chief Executive Officer Tom Leverton and has a portfolio of 747 locations, the majority of which are company operated, according to its website.

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