CEC Entertainment goes public through a merger with Leo Holdings

Chuck E. Cheese’s and Peter Piper Pizza’s parent company CEC Entertainment is reportedly returning to the New York Stock Exchange via a merger with Leo Holdings, a UK-based special purpose acquisition company.

For the uninitiated, special purpose acquisition companies use the earnings from an IPO, in combination with bank financing, to acquire and make privately held consumer firms public.

According to sources familiar with the merger, after the deal is closed, CEC Entertainment’s owner Queso Holdings will trade on the New York Stock Exchange with the ticker CEC. The deal is likely to close in the second quarter of 2019. Additionally, Leo Holdings plans to change its name to Chuck E. Cheese Brands, with CEC Entertainment becoming a subsidiary of the company, reported sources close to the development.

As per company filings, excluding sale leaseback obligations and capital lease, CEC Entertainment had an outstanding debt of $978.9 million as of Dec. 30. The outstanding debt will be paid using profits from the deal, claimed sources.

Back in 2014, Apollo Global Management, a private equity firm, acquired Chuck E. Cheese’s parent company for approximately $948 million, making it private. As part of the deal, Apollo will not sell any of its shares and retain a 51 percent stake in the new entity, reported sources.

The company believes CEC Entertainment will be valued at $1.4 billion. In the fiscal year 2018, the company recorded net sales worth $896 million at 750 venues throughout the Chuck E. Cheese and Peter Piper Pizza brands. In addition, entertainment and merchandise account for more than half of its revenue while the remaining 45 percent comes from food and beverage.

Reportedly, Chuck E. Cheese plans to introduce new limited-period food offers, and to branch out internationally including plans to set up its first store in India by early 2020.