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Chuck E. Cheese owner agrees to $1.3 billion all-cash buyout

Published: Friday, Jan. 17, 2014 1:15 a.m. CDT

Ending weeks of speculation, the Irving, Texas-based parent of Chuck E. Cheese’s restaurants said early Thursday it has agreed to be purchased by an affiliate of Apollo Global Management LLC, in an all-cash deal valued at $1.3 billion.

CEC Entertainment said it has entered into a definitive merger agreement for $54 a share. That’s a 25 percent premium over the company’s stock price before rumors began circulating that it was up for sale.

The sale of the company, which operates 577 restaurants, also includes the assumption of debt.

CEC went public in 1989. It has approximately 17.6 million outstanding shares, according to FactSet.

Chuck E. Cheese restaurants are known for their games, rides and play areas for children. Robotic characters including the Chuck E. Cheese mouse, and others provide musical entertainment. The restaurants offer food, such as pizza, sandwiches, appetizers, a salad bar and desserts.

Founded by Leon Black in 1990, Apollo buys troubled companies using borrowed money and tries to sell them for more, usually years later, in a transaction known as a leveraged buyout.

CEC may seek out superior proposals from limited third parties until Jan. 29. The company, which announced Thursday 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 try to ward off hostile takeover attempts.

CEC said Thursday that 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.

Its board unanimously approved the transaction.

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Topics: t000002705,t000035070,t000140171

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