Will Chuck E. Cheese IPO Bring The Cheddar?

The news came Monday (April 8) that Chuck E. Cheese – the family-focused entertainment and restaurant combinations that have housed many a birthday party and likely drained many a parental pocketbook – is going public.

To be more precise, Chuck E. Cheese’s parent company is bringing shares to the New York Stock Exchange.

In terms of mechanics, Queso Holdings owns CEC Entertainment, which in turn is the parent company of the cartoon mouse’s aforementioned outposts (along with Peter Piper Pizza, which also offers pizza and games). And it is Queso that is merging with what CNBC describes as a special purpose acquisition company, Leo Holdings. (The special purpose companies use proceeds from an IPO to come public.)

Beyond the mechanics, and after the listing, Queso will change its name to Chuck E. Cheese Brands and list with the ticker CEC.

The transaction is slated to happen in the current quarter, and brings the company public again after five years of operating as a private firm. The company had been purchased and taken private by Apollo Global Management. And, as The Wall Street Journal reported Monday (April 8), the firm has had a bit of a makeover under Apollo’s stewardship. Efforts have included remodeling and tech upgrades.

Same-store sales for more than 600 Chuck E. Cheese locations and 144 Peter Piper locations were expected by management to be up 7.7 percent in the first quarter, as measured year over year, and accelerating from the 3.3 percent seen in the fourth quarter of 2018. Proceeds from the offering (as yet undefined) will go in part toward paying down debt, which stood at about $979 million. Roughly half of the $896 million in sales logged by the company last year came from entertainment and merchandise, said CNBC.

The relisting brings to mind another return of a decidedly old-world company – you know, the kind that traffic in tangible goods and experiences – and that’s Levi Strauss. That company also returned to public markets after a lengthy absence. The idea seems to be it’s now or never, and that a sweet spot exists for CEC to be warmly received by investors before the party’s over. That might sound cynical – but then again, consider the fact that this would be the first restaurant IPO in several years, which indicates there may be a bit of a hook here.

The hook is that this is no sit down and dine play, but more of a dine and dash … right to the video games. The fact remains that gaming is hot. Chuck E. Cheese has seemingly rebounded a bit from the threat of trampoline parks that at the end of 2017 had sent same-store results down by mid-single digits. The company had also transitioned to a new credit card payment system (chip and PIN) that had been rejecting cards. In addition, the firm has in past years been rolling out a new payment rate for gaming, moving from tokens to points to, now, a time-limit system that allows for unlimited gaming tied to set periods.

It’s too early to tell whether investors will strike while the pizza and gaming is hot, but amid excitement over all manner of IPOs (see the initial reactions to Levi Strauss and Lyft), the time may indeed be now.