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Can Apollo Save Chuck E. Cheese?

Post 18 of 32
Can Apollo Save Chuck E. Cheese?

There’s at least one company out there willing to bet Chuck E. Cheese is not a lost cause. The restaurant chain, which has been struggling to remain a relevant entertainment spot for years, agreed to be acquired for $950 million by an affiliate of Apollo Global Management. The investment firm is known for acquiring troubled chains and then reselling them. For this project, the firm is also assuming the restaurant’s outstanding debt and will pay $54 per share for CEC Entertainment, Inc. (Which proved to be a 12% premium to the company’s closing price of $48.43 on January 15, 2014.)

While Chuck E. Cheese was initially an innovative concept, analysts say the concept mostly failed to keep up with the times and never really figured out how to appeal to what is likely their primary audience: parents. Lynne Collier, managing director at the investment firm Sterne Agee, believes the chain could create a wider appeal by focusing on more parental entertainment options in addition to expanding beyond the typical weekend and birthday celebrations.

Growth and pricing strategies, margin enhancement, and organizational optimization will only be a few of the obstacles standing in the way of this overhaul. There is still high brand awareness for the chain, but it will take more than that to see the benefits of a properly executed business strategy come to life.

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