LONDON and IRVING, Texas, April 8,
2019 /PRNewswire/ -- CEC Entertainment, Inc. ("CEC" or
the "Company"), a nationally recognized leader in family
entertainment and dining, and Leo Holdings, Corporation (NYSE: LHC)
("Leo"), a publicly traded special purpose acquisition company,
announced today that Leo and Queso Holdings, Inc. ("Queso"), the
parent company of CEC, together with Queso's controlling
stockholder, an entity owned by funds managed by affiliates of
Apollo Global Management, LLC (NYSE: APO) (together with its
consolidated subsidiaries, "Apollo"), have entered into a definitive
business combination agreement.
CEC is a leading owner, operator, and franchisor of a global
network of entertainment and dining venues across two complementary
brands, Chuck E. Cheese and Peter Piper
Pizza. Chuck E. Cheese creates positive, lifelong memories
for families through fun, play, and delicious handmade pizza.
Peter Piper Pizza features dining,
entertainment, and carryout, and takes pride in delivering quality
food and fun that reconnects family and friends.
Immediately following the closing of the proposed transaction,
Leo intends to change its name to Chuck E. Cheese Brands Inc. The
current CEC executive management team will continue to lead the
Company, which will trade on the New York Stock Exchange under
ticker symbol CEC. This transaction will reintroduce CEC to the
equity capital markets as a publicly listed company with an
anticipated initial enterprise value of approximately $1.4 billion or 7.5x the Company's estimated 2019
Adjusted EBITDA of approximately $187
million. The Apollo funds
will not be selling any shares in the transaction and will continue
to be CEC's largest shareholder with approximately 51% ownership of
the Company post-closing.
The Boards of Directors of both Leo and Queso have unanimously
approved the proposed transaction. Completion of the transaction is
subject to Leo shareholder approval and other customary closing
conditions. The parties expect that the transaction will close in
the second quarter of 2019.
CEC Company Highlights
- Strong Same Store Sales Momentum:
-
- Q1 2019: +7.7% (preliminary)
- Q4 2018: +3.3%
- Q3 2018: +2.2%
- Q2 2018: +1.0%
- Strong Earnings Momentum:
-
- FY 2018 Adjusted EBITDA of $175
million and Adjusted EBITDA Margin of ~20%,
respectively
- LTM Q1 2019 Adjusted EBITDA of $183
million (preliminary)
- Key Statistics as of Year-end FY 2018:
-
- Revenue of $896 million
- Gross Margin of ~85%
- 750 System-wide Venues:
-
- Chuck E. Cheese: 606 system wide venues across 47 states and 14
countries (13% International, 15% Franchised)
- Peter Piper Pizza: 144 system
wide venues across six states (AZ, CA, FL, NM, NV, TX) and
Mexico (31% International, 73%
Franchised)
- Average Sales Per Venue:
-
- Chuck E. Cheese: ~$1.6
million
- Peter Piper Pizza: ~$1.8 million
- Venue Revenue Mix: 45% Food & Beverage / 55% Entertainment
& Merchandise
Tom Leverton, Chief Executive
Officer, CEC Entertainment, Inc.,
said, "I am extremely proud of everything that we have accomplished
at CEC, and we are pleased to be seeing significant momentum in
recent same store sales trends. The executive team is eager to work
with Leo as we continue to aggressively pursue opportunities in the
next stage of our Company's evolution. Our future growth plans are
based on enhancing the total guest experience, unlocking
operational investments, growing and upgrading our venues, and
opportunistically pursuing M&A initiatives."
Lyndon Lea, Chairman and Chief
Executive Officer, Leo Holdings,
Corp. said, "Having had almost 30 years of experience of investing
in the consumer sector, it is clear to me that the iconic Chuck E.
Cheese brand is a part of Americana. Rarely do brands possess such
rich heritage and imbue such fond memories across generations. In
CEC we have secured an extremely attractive acquisition. Not only
because of the strength of the brand, but the financial
characteristics of low risk growth through existing site
refurbishments, 20% Adjusted EBITDA margins and high cash flow
conversion make for a compelling investment. The opportunity
becomes even more convincing when coupled with the fact that the
business has proven resiliency as evidenced by its performance
during the last three economic downturns. The acquisition of CEC
strongly fulfills the mandate of the Leo shareholders and does so
at an attractive valuation. Furthermore, I look forward to
partnering with Tom Leverton and his
team along with Apollo as we
continue to evolve the Chuck E. Cheese business model into the
future."
Andrew Jhawar, Senior Partner and
Head of the Consumer and Retail Group at Apollo and Chairman of the Board at CEC
Entertainment, Inc., said, "Since Apollo first acquired the Company
in 2014, CEC has made significant capital investments in PlayPass
technology, store remodels, and the rollout of the All You Can Play
initiative which have positioned CEC for tremendous continued
growth opportunities going forward. Under Apollo's ownership, CEC's passionate
leadership team has reinvigorated CEC into the leading Family
Entertainment platform that it is today. As the largest continuing
shareholder at CEC, we are excited about the collaboration with the
Leo team as this transaction will allow CEC to meaningfully
de-leverage its balance sheet, thereby unlocking additional free
cash flow that will enable the Company to further accelerate
investments and realize its growth potential."
Key Transaction Terms
The transaction will be effected pursuant to the Business
Combination Agreement entered into by and among Leo, Queso and
Queso's controlling stockholder. Concurrent with the closing of the
transaction, Leo will domesticate as a Delaware corporation, following which Queso
will merge with and into Leo with the result that CEC will continue
as a wholly-owned subsidiary of Leo, which will be renamed Chuck E.
Cheese Brands Inc. (the "Business Combination").
Concurrent with the consummation of the transaction, additional
investors will purchase $100 million
of common stock of Leo in a private placement. After giving effect
to any redemptions by the public shareholders of Leo, the balance
of the approximately $200 million in
cash held in Leo Holdings' trust account, together with the
$100 million in private placement
proceeds, will be used to pay transaction expenses and de-leverage
the Company's existing capital structure.
Existing shareholders including funds managed by Apollo, the current majority owners of CEC,
expect to hold an approximately 51% stake in CEC upon completion of
the transaction.
Tom Leverton, Chief Executive
Officer, and Jim Howell, Chief
Financial Officer, will continue to lead the Company. Lyndon Lea will join the Company's Board of
Directors as Co-Chairman of the Board with Andrew Jhawar of Apollo.
For additional information on the proposed transaction, see
Leo's Current Report on Form 8-K, which will be filed promptly and
can be obtained, without charge, at the website of the U.S.
Securities and Exchange Commission ("SEC") at www.sec.gov.
Citigroup Global Markets Inc. acted as financial advisor,
capital markets advisor and private placement agent to Leo.
Jefferies LLC acted as financial advisor and capital markets
advisor to CEC. Kirkland & Ellis LLP acted as legal counsel to
Leo. Morgan, Lewis & Bockius LLP acted as legal counsel to
CEC.
Investor Conference Call Information
CEC and Leo will host a joint investor conference call to
discuss the proposed transaction on Monday,
April 8, 2019 at 11:00 a.m.
ET. Hosting the call will be Tom
Leverton, Chief Executive Officer, Jim Howell, Chief Financial Officer,
CEC Entertainment, Inc. and
Lyndon Lea, Chairman and Chief
Executive Officer, Leo Holdings,
Corp.
Interested parties may listen to the call via telephone by
dialing 877-407-0792, or for international callers, 201-689-8263. A
telephone replay will be available shortly after the call and can
be accessed by dialing 844-512-2921, or for international callers,
412-317-6671 (confirmation code: 13689415).
The conference call webcast and a related investor presentation
with more detailed information regarding the proposed transaction
will be available at
https://www.chuckecheese.com/company/investor-relations under the
tab "Business Combination". The investor presentation will also be
furnished today to the SEC and can be viewed at the SEC's website
at www.sec.gov.
About CEC Entertainment, Inc.
CEC Entertainment, Inc. is the nationally recognized leader in
family dining and entertainment with both its Chuck E. Cheese and
Peter Piper Pizza venues. As
America's #1 place for birthdays and the place Where A Kid Can Be A
KidĀ®, Chuck E. Cheese's goal is to create positive, lifelong
memories for families through fun, play and delicious handmade
pizza. With the first-of-its-kind gaming experience, All You Can
Play, kids have access to play every game at Chuck E. Cheese, as
many times as they want on any day, without any restrictions.
Committed to providing a fun, safe environment, Chuck E. Cheese
helps protect families through industry-leading programs such as
Kid CheckĀ®. As a strong advocate for its local communities, Chuck
E. Cheese has donated more than $16
million to schools through its fundraising programs and
supports its new national charity partner, Boys and Girls Clubs of
America. Peter Piper Pizza features
dining, entertainment and carryout with a neighborhood pizzeria
feel and "pizza made fresh, families made happy" culture.
Peter Piper Pizza takes pride in
delivering quality food and fun that reconnects family and friends.
With a bold design and contemporary layout, an open kitchen
revealing much of their handcrafted food preparation, the latest
technology and games, and beer and wine for adults, Peter Piper Pizza restaurants appeal to parents
and kids alike. As of December 30,
2018, the Company and its franchisees operated a system of
606 Chuck E. Cheese and 144 Peter Piper Pizza venues, with
locations in 47 states and 14 foreign countries and territories.
For more information, visit chuckecheese.com and
peterpiperpizza.com.
About Leo Holdings, Corp.
Leo Holdings, Corp. is a blank check company formed for the
purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business
combination with one or more businesses.
About Apollo Global Management, LLC
Apollo is a leading global
alternative investment manager with offices in New York, Los
Angeles, San Diego,
Houston, Bethesda, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong
Kong, Shanghai and
Tokyo. Apollo had assets under management of
approximately $280 billion as of
December 31, 2018 in private equity,
credit and real assets funds invested across a core group of nine
industries where Apollo has
considerable knowledge and resources. For more information about
Apollo, please visit
www.apollo.com.
Important Information About the Proposed Transaction and
Where to Find It
In connection with the proposed Business Combination, including
the domestication, Leo intends to file with the SEC a registration
statement on Form S-4 containing a preliminary proxy statement and
a preliminary prospectus of Leo. After the registration statement
is declared effective, Leo will mail a definitive proxy
statement/prospectus relating to the proposed Business Combination
to its shareholders. Leo's shareholders and other interested
persons are advised to read, when available, the preliminary proxy
statement/prospectus and the amendments thereto and the definitive
proxy statement/prospectus and other documents filed in connection
with the proposed Business Combination, as these materials will
contain important information about CEC, Leo and the Business
Combination. When available, the definitive proxy
statement/prospectus and other relevant materials for the proposed
Business Combination will be mailed to shareholders of Leo as of a
record date to be established for voting on the proposed Business
Combination. Shareholders will also be able to obtain copies of the
preliminary proxy statement/prospectus, the definitive proxy
statement/prospectus and other documents filed with the SEC,
without charge, once available, at the SEC's web site at
www.sec.gov, or by directing a request to: Leo Holdings, Corp., 21
Grosvenor Place, London, SW1X
7HF.
Participants in the Solicitation
Leo and its directors and executive officers may be deemed
participants in the solicitation of proxies from Leo's shareholders
with respect to the proposed Business Combination. A list of the
names of those directors and executive officers and a description
of their interests in Leo is contained in Leo's annual report on
Form 10-K for the fiscal year ended December
31, 2018, which was filed with the SEC and is available free
of charge at the SEC's web site at www.sec.gov, or by directing a
request to Leo Holdings, Corp., 21 Grosvenor Place, London, SW1X 7HF. Additional information
regarding the interests of such participants will be contained in
the proxy statement for the proposed Business Transaction when
available.
Queso and its directors and executive officers may also be
deemed to be participants in the solicitation of proxies from the
shareholders of Leo in connection with the proposed Business
Combination. A list of the names of such directors and executive
officers and information regarding their interests in the proposed
Business Combination will be included in the proxy
statement/prospectus for the proposed Business Combination when
available.
Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Leo's and CEC's actual
results may differ from their expectations, estimates and
projections and consequently, you should not rely on these forward
looking statements as predictions of future events. Words such as
"expect," "estimate," "project," "budget," "forecast,"
"anticipate," "intend," "plan," "may," "will," "could," "should,"
"believes," "predicts," "potential," "continue," and similar
expressions are intended to identify such forward-looking
statements. These forward-looking statements include, without
limitation, Leo's and CEC's expectations with respect to future
performance and anticipated financial impacts of the proposed
Business Combination, the satisfaction of the closing conditions to
the Business Combination and the timing of the completion of the
Business Combination. These forward-looking statements involve
significant risks and uncertainties that could cause the actual
results to differ materially from the expected results. Most of
these factors are outside Leo's and CEC's control and are difficult
to predict. Factors that may cause such differences include, but
are not limited to: (1) the occurrence of any event, change or
other circumstances that could give rise to the termination of the
Business Combination Agreement, (2) the outcome of any legal
proceedings that may be instituted against Leo and CEC following
the announcement of the Business Combination Agreement and the
transactions contemplated therein; (3) the inability to complete
the proposed Business Combination, including due to failure to
obtain approval of the shareholders of Leo or other conditions to
closing in the Business Combination Agreement; (4) the occurrence
of any event, change or other circumstance that could give rise to
the termination of the Business Combination Agreement or could
otherwise cause the Business Combination to fail to close; (5) the
receipt of an unsolicited offer from another party for an
alternative business transaction that could interfere with the
proposed Business Combination; (6) the inability to obtain or
maintain the listing of the post-acquisition company's ordinary
shares on the New York Stock Exchange following the proposed
Business Combination; (7) the risk that the proposed Business
Combination disrupts current plans and operations as a result of
the announcement and consummation of the proposed Business
Combination; (8) the ability to recognize the anticipated benefits
of the proposed Business Combination, which may be affected by,
among other things, competition, the ability of the combined
company to grow and manage growth profitably and retain its key
employees; (9) costs related to the proposed Business Combination;
(10) changes in applicable laws or regulations; (11) the
possibility that CEC or the combined company may be adversely
affected by other economic, business, and/or competitive factors;
and (12) other risks and uncertainties indicated from time to time
in the proxy statement relating to the proposed Business
Combination, including those under "Risk Factors" therein, and in
Leo's other filings with the SEC. Leo cautions that the foregoing
list of factors is not exclusive. Leo cautions readers not to place
undue reliance upon any forward-looking statements, which speak
only as of the date made. Leo does not undertake or accept any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements to reflect any change
in its expectations or any change in events, conditions or
circumstances on which any such statement is based.
No Offer or Solicitation
This press release shall not constitute a solicitation of a
proxy, consent or authorization with respect to any securities or
in respect of the proposed Business Combination. This press release
shall also not constitute an offer to sell or the solicitation of
an offer to buy any securities, nor shall there be any sale of
securities in any states or jurisdictions in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of section 10 of the Securities
Act of 1933, as amended.
Contacts:
For CEC Entertainment, Inc.
Investors
Jim
Howell
Chief Financial Officer
CEC Entertainment, Inc.
(972) 258-8507
Raphael Gross, ICR
(203) 682-8253
Raphael.Gross@icrinc.com
Media
Liz DiTrapano,
ICR
(646) 277-1226
Liz.DiTrapano@icrinc.com
For Leo Holdings, Corp.
Investors
Sherif Guirgis
(310) 800-1005
guirgis@lioncapital.com
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SOURCE CEC Entertainment, Inc.