Chuck E. Cheese's parent company is returning to the New York Stock Exchange through a merger with a special purpose company, making it the first restaurant company to enter the public market in four years.
Special purpose acquisition companies have no assets but use the proceeds from an IPO, combined with bank financing, to buy and take privately held consumer companies public. Leo Holdings, the SPAC merging with the parent of the children's party chain, was founded by executives of Lion Capital, a British private equity firm, to acquire a consumer business.
After the deal closes, Queso Holdings, which owns CEC Entertainment, the parent company of Chuck E. Cheese and Peter Piper Pizza, will trade on the NYSE with the ticker CEC this summer.
The deal is expected to close in the second quarter of 2019. Leo Holdings also plans to change its name to Chuck E. Cheese Brands. CEC Entertainment will be a subsidiary of Chuck E. Cheese Brands.
Proceeds from the deal will go toward paying down the company's debt. Excluding capital lease and sale leaseback obligations, CEC Entertainment had $978.9 million in outstanding debt as of Dec. 30, according to company filings.
Private equity firm Apollo Global Management bought Chuck E. Cheese's parent company in 2014 for about $948 million, taking it private. Apollo will not sell any of its shares as part of the deal and will retain a 51 percent stake in the newly formed company.
The company believes CEC Entertainment will have an enterprise value of $1.4 billion. In fiscal 2018, the company reported net sales of $896 million at its 750 venues across the Chuck E. Cheese and Peter Piper Pizza brands. More than half its revenue comes from entertainment and merchandise, with the remaining 45 percent coming from food and beverage.
While the company was private, executives focused on investing in the business by bringing more parent-friendly games and revamping its menu.
"As I joined the company [in 2014], I saw what a lot of parents saw at the time," CEC Entertainment CEO Tom Leverton said. "Chuck E. needed to be reenergized, revitalized."
In its first quarter of fiscal 2019, CEC Entertainment reported preliminary same-store sales growth of 7.7 percent. Leverton said the launch of All You Can Play, which lets parents buy a chunk of time for their children to play games rather than purchasing tokens, was the primary driver of that growth.
Chuck E. Cheese has plans to add new limited-time food offers — like unicorn churros to celebrate National Unicorn Day on Tuesday — and to branch out internationally. Leverton named Mexico and Saudi Arabia as its top two international markets. The company is also planning to add its first store in India by early next year.
Chuck E. Cheese is also in the middle of renovating its stores. The company has plans to reimage 60 stores by end of 2019, bringing its total number of remodeled locations to 92 out of its 515 company-owned stores.
Correction: This story was revised to correct Apollo Global's purchase price for Chuck E. Cheese's parent company in 2014. It was $948 million.