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Leo strings together Chuck E Cheese’s deal
Posted on Tuesday, 09 April 2019 12:47
CEC Entertainment is returning to the public playing field some five years after going private as the Apollo Global-backed parent of the iconic chain is reverse merging into listed special purpose acquisition company Leo Holdings.
The owner, operator and franchisor of a global network of entertainment and dining venues is perhaps best known for its Chuck E Cheese brand, though its stable also includes Peter Piper Pizza.
It generated revenue of USD 896.00 million in the 12 months ended 30th December 2018 from 750 venues located across the US and 14 countries, and it had a gross margin of about 85.0 per cent at year-end.
Leo is acquiring CEC’s owner, Queso, in a business combination that results in Lion Capital’s blank check being renamed Chuck E Cheese Brands Inc.
The illustrative pro forma enterprise value (EV) of USD 1.41 billion comprises USD 700.00 million in equity, estimated net debt of USD 601.00 million and a sale leaseback interest and amortisation of USD 109.00 million.
In terms of transaction multiples, the deal equates to 7.5x EV to 2019 expected (E) adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of USD 187.00 million and 6.9x 2020E adjusted EBITDA of USD 205.00 million.
Concurrent with closing, additional investors will buy USD 100.00 million-worth of stock via a private placement, the proceeds of which will be used to deleverage the existing capital structure.
With regards to ownership, Apollo, which is not selling any shares in the deal, is rolling over its investment and will end up with 51.5 per cent of Chuck E Cheese Brands.
Lion Capital is expected to hold 4.6 per cent post-closing, Leo’s shareholders will own 28.6 per cent, and the additional private investment in a public entity equity equates to a 15.3 per cent slice of the company.
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