CEC Entertainment Inc., the parent to the Chuck E. Cheese’s family entertainment-restaurant chain, is reportedly exploring a potential sale, according to a Reuters report published on Tuesday.

Irving, Texas-based CEC “is working with Goldman Sachs Group Inc. and has been speaking with interested buyers over the last several months,” the report said, citing unnamed sources and referencing private-equity buyers.

The company declined to expand on the report Wednesday. Michelle Chism, CEC’s director of corporate communications, said, “It’s our long-standing policy not to comment on rumors or speculation.”

CEC has 571 Chuck E. Cheese’s units in 47 states and 10 countries and territories. The company owns and operates 518 locations in the United States and Canada; the rest are franchised or licensed.

CEC shares at midday Wednesday had risen to more than $49, more than 13 percent higher than the prior day’s close.

Lynne Collier, an analyst with Sterne Agee, said that “in looking at a valuation in the event of a potential take-out,” she sees shares possibly ranging in price of between $50 and $60 based on a multiple of seven to eight times the next-12-month earnings before taxes, depreciation and amortization.

CEC has encountered sales headwinds since the recession. For its most recent third quarter, which ended Sept. 29, the company reported a same-store sales decline of 2.1 percent over the prior-year period. The company said birthday party sales had fallen precipitously in the period, declining 11 percent.

Net income in the quarter also fell about 5.1 percent, to $7.4 million, from $7.8 million in the same period of 2012. Revenue slipped 0.4 percent, to $195.9 million from $196.6 million.

CEC worked to refresh the Chuck E. Cheese’s concept in 2012 with a makeover of its signature Chuck E. Cheese character into a rock ‘n’ roll look. However, at least one study found that the new mascot didn’t resonate as strongly with children and parents.

On Dec. 30, the company opened four new restaurants: two in Florida, one in El Paso, Texas, and another in Bronx, N.Y.

A number of other restaurant brands are reportedly exploring potential sales, including Red Lobster, Ruby Tuesday and T.G.I. Friday’s. In December, Atlanta-based Roark Capital Group closed on its acquisition of CKE, parent to the Carl's Jr. and Hardee’s chains.

Contact Ron Ruggless at ronald.ruggless@penton.com.
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