Report: Apollo considers bid for Dave & Buster’s

Investment firm Apollo Global Management LLC, which acquired the Chuck E. Cheese’s chain in February, is considering a bid for Dave & Buster’s Inc., the Bloomberg news agency reported Thursday.

Oak Hill Capital Partners is seeking about $1 billion for Dallas-based Dave & Buster’s, which has more than 60 units in the United States and Canada, Bloomberg said, citing “two people with knowledge of the matter.”

Both Apollo and Dave & Buster's declined to comment on the report.

On Feb. 14, Apollo completed its $1.3 billion acquisition of Irving, Texas-based CEC Entertainment Inc., which operates and franchises 577 Chuck E. Cheese’s units. The concept is aimed at a younger audience than the Dave & Buster’s chain, which offers more adult arcade games, billiards and a more extensive adult-beverage and restaurant offering.

Oak Hill Capital bought Dave & Buster’s from Wellspring Capital Management in June 2010 in a deal valued at $570 million.

Dave & Buster’s, which reports some financial data quarterly because of bondholders, said revenues increased 8.6 percent in the Nov. 3-ended third quarter, to $142.3 million, from $131.1 million in the prior-year period.

Same-store sales for the quarter rose 2.4 percent, adjusted for a one-week calendar shift. Steve King, Dave and Buster’s chief executive, noted that an investment in marketing on national cable television helped boost sales during the quarter.

“Our marketing efforts were further enhanced by improved sports viewing areas, as well as other ambiance enhancements at many locations that are resonating with guests,” King said in a statement accompanying the earnings release.

Home, portable and Internet gaming options have put pressure on the arcade-restaurant segment, according to data from research firm IBISWorld Inc. The research firm estimated the $2 billion industry segment saw a 0.9-percent decline in revenue in the 2008-2013 period. Chuck E. Cheese’s and Dave & Buster’s were the two main brands in the segment, IBISWorld said.

Despite those pressures, Dave & Buster’s, which opened its first unit in Dallas in 1982, said in December that it planned to add a total of five new stores in its fiscal 2013, of which three were open as of the end of the third quarter.

During the third quarter, two stores opened in Syracuse and Albany, New York. Subsequent to the end of the third quarter, the company opened stores in Cary, N.C., and in Livonia, Mich. In guidance, Dave & Buster’s said that for 2014 it planned to open seven to eight new stores.

Apollo, with its purchase of CEC Entertainment, gained a system of 577 Chuck E. Cheese’s units located in 47 states and 10 other countries or territories.

Update: March 13, 2014: This story was updated after a spokesman for Apollo Capital Management said late Thursday that the investment firm would have no comment on the Bloomberg report.

Contact Ron Ruggless at [email protected].
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