An affiliate of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) and CEC Entertainment, Inc. (NYSE:CEC) (“CEC”) today announced that they have entered into a definitive merger agreement (the “Merger Agreement”) whereby Apollo, a leading global alternative investment manager, will acquire CEC, the nationally recognized leader in family dining and entertainment which operates 577 Chuck E. Cheese’s stores, for approximately $1.3 billion, including the assumption of the Company’s outstanding debt.
Apollo’s $54.00 per share all cash offer represents a premium of approximately 25% over CEC’s closing share price on January 7, 2014, the last trading day prior to media speculation regarding a possible transaction and a premium of approximately 36% over the twelve-month volume weighted average share price for the period ending January 7, 2014.
The announcement follows a thorough review of strategic alternatives undertaken by the CEC Board of Directors to maximize shareholder value. The transaction was unanimously approved by the CEC Board, which recommends that CEC shareholders tender their shares in the offer.
“We are pleased to have reached this agreement with Apollo, which maximizes value for all of our shareholders,” said Richard M. Frank, Executive Chairman of CEC. “This transaction represents the successful conclusion of our extensive review of strategic alternatives.”
“We are excited about this transaction with Apollo, as it recognizes the value of CEC’s global brand, strong cash flows and growth prospects while providing our shareholders with an immediate and substantial premium,” said Michael H. Magusiak, President and Chief Executive Officer of CEC. “Apollo brings significant industry expertise and financial resources, and we look forward to working with them to further grow CEC domestically and internationally.”
“This transaction with CEC gives us the opportunity to partner with the proven leader in family dining and entertainment,” said Scott Ross, Partner at Apollo Global Management. “Across the U.S., and increasingly around the world, the Chuck E. Cheese’s brand represents quality, safe and fun family entertainment.”
“We look forward to partnering with CEC’s exceptional management team, talented employees and franchise partners to support the continued growth of the Company,” said Lance Milken, Partner at Apollo Global Management.
The transaction will be implemented through a cash tender offer at $54.00 per share. The transaction is conditioned upon, among other things, satisfaction of the minimum tender condition of more than 50 percent of the Company’s common shares, the receipt of the Federal Trade Commission’s approval under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, and other customary closing conditions. Under the terms of the agreement, the Company may solicit superior proposals from limited third parties until January 29, 2014. There can be no assurances that this process will result in a superior proposal, and the Company does not intend to discuss any developments with regard to this process unless the Company’s Board of Directors makes a decision with respect to a potential superior proposal.
Goldman, Sachs & Co. is serving as financial advisor to the Company, and Weil, Gotshal & Manges LLP is serving as the Company’s legal advisor. Deutsche Bank Securities Inc., Morgan Stanley and UBS Securities LLC are serving as financial advisors to Apollo, and, together with Credit Suisse, provided debt financing commitments. Wachtell Lipton, Rosen & Katz and Paul, Weiss, Rifkind, Wharton & Garrison LLP are serving as Apollo’s legal advisors.
January 16, 2014