What happened
Dave & Buster's (NASDAQ: PLAY) is upsizing in a serious way.
Tuesday morning, the company announced that it has agreed to acquire family entertainment venue operator Main Event from its current owners. While this bulks up the company significantly and perhaps shifts its business focus, investors don't seem pleased by the move. They traded the stock down by more than 8% on the day.
So what
Like a chip in salsa, Dave & Buster's is scooping up Main Event from its owners, Australia-based Ardent Leisure Group and American investment firm RedBird Capital Partners.
Image source: Getty Images.
Dave & Buster's said the total enterprise value of the deal is $835 million, and the transaction is expected to close later this year. When it does, the current Main Event CEO will become CEO of the merged entity, which will continue using the Dave & Buster's name.
The acquirer said it plans to use cash on hand and funds from committed lenders to pay for the deal. It didn't get any more specific. At the end of January, Dave & Buster's had slightly over $25.9 million in cash and short-term investments on its balance sheet.
Main Event, described as a "family entertainment concept," has 50 locations throughout the U.S. This adds quite a bit of presence to Dave & Buster's, which currently operates 145 of its entertainment and dining venues in the country.
Now what
There are clear synergies between Dave & Buster's and Main Event. The latter company's venues feature a bunch of physical and semi-physical gaming activities, including laser tag, mini golf, and virtual reality programs.
Despite the potentially good fit, with these facilities in its portfolio Dave & Buster's will likely have to rejig its marketing focus, and perhaps even its management strategy. This, combined with the typical investor reaction when a company announces a big-ticket buy, probably led many investors to the exit on Tuesday.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Dave & Busters Entertainment. The Motley Fool has a disclosure policy.
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