Restaurant chain Chuck E. Cheese prepares IPO -sources

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By Lauren Hirsch and Greg Roumeliotis

<span class="articleLocation”>The parent of Chuck E. Cheese has begun
preparations for an initial public offering (IPO) that could
value the U.S. restaurant chain at more than $1 billion,
including debt, people familiar with the situation said on
Tuesday.

The IPO would be a bet that Irving, Texas-based Chuck E.
Cheese’s arcade games and kid-focused activities will
differentiate it in the minds of investors from other more
commoditized restaurant chains that have failed to whet their
appetite.

Chuck E. Cheese’s private equity owner, Apollo Global
Management LLC, has initiated conversations with banks
about an IPO that could come in the second half of 2017, though
it has not yet hired underwriters, the people said.

An outright sale of the company is also possible were Apollo
to receive an attractive enough offer, the people added.

The sources asked not to be named because the IPO
preparations are confidential. Apollo and CEC Entertainment Inc,
the company that owns Chuck E. Cheese, declined to comment.

Through 2014 and 2015, many fast-growing restaurant chains
went public that later had a hard time expanding beyond their
core regional base. The last such company to go public,
Brazillian steakhouse Fogo De Chao Inc, followed many
of its peers in trading below its June 2015 IPO price.

Within the broader restaurant industry, sit-down casual
restaurants have struggled as consumers opt to eat at home and
increasingly avoid the mall, where such restaurants are often
located. The threat of a rising minimum wage has put further
pressure on the sector.

Still, “interactive” restaurants such as Chuck E. Cheese,
which offers video games, bumper cars and play areas in addition
to food, promise a distinctive dining experience. Its closest
competitor, Dave & Buster’s Entertainment Inc, saw
comparable store sales increase nearly 6 percent in the third
quarter of 2016 over the year prior, a slower growth rate than
the 8.8 percent growth it achieved in 2015.

Chuck E. Cheese was taken private by Apollo in 2014 for $1.3
billion, including debt. It has since sought to broaden its
appeal beyond children, expanding its alcohol offerings for
adults.

Chuck E. Cheese was founded in 1977 by Nolan Bushnell, the
founder of video game company Atari and one of the first bosses
of Apple Inc founder Steve Jobs.

The company and its franchisees now operate a system of 603
Chuck E. Cheese and 144 Peter Piper Pizza stores, with locations
in 47 U.S. states and 11 other countries. (Additional reporting by Olivia Oran in New York)



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