Family dining chain,
CEC Entertainment, Inc.
) recently entered into an agreement as per which an affiliate of
Apollo Global Management (APO), a leading global alternative
investment manager, will take over the company for $1.3 billion,
including debt. The cash tender offer of $54.00 per share
represents a 25.0% premium over the company's closing share price
as of Jan 7, 2014.
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Per media reports, CEC Entertainment that runs the Chuck E.
Cheese chain was looking for a buyer. This company offering food
and games has been struggling of late due to the challenging
environment. In fact, third quarter revenue (reported in
November) declined 0.4% year over year due to a 3.6% drop in food
and beverage sales. Comps declined 2.1% hurt by an 11% decrease
in birthday party sales.
Due to the weak results, the board of directors of CEC
Entertainment was looking for a suitable offer and approved the
deal after reviewing a number of strategic alternatives. It also
adopted a shareholder rights plan as per which it declared a
dividend of one preferred stock purchase right on each
outstanding share of common stock as of Jan 26, 2014.
The merger will enable CEC Entertainment to expand domestically
as well as internationally and provide a substantial premium to
CEC Entertainment presently has a Zacks Rank #3 (Hold). Some
better-ranked stocks in the sector include
Fiesta Restaurant Group, Inc.
Jack in the Box Inc.
Buffalo Wild Wings Inc.
). While Fiesta Restaurant and Jack in the Box carry a Zacks Rank
#1 (Strong Buy), Buffalo Wild Wings holds a Zacks Rank #2 (Buy).