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Dave & Buster’s raises $94.1M in IPO

Dave & Buster’s raises $94.1M in IPO

The company's public debut received a favorable reception on Wall Street


Dave & Buster’s Entertainment Inc. returned to the public market Friday with an initial public offering that had a warm reception on Wall Street.

The Dallas-based company priced its 5.9 million shares of common stock at $16 per share, the low end of its expected range of $16 to $18. The IPO raised about $94.1 million, which the company has said it will use to pay off debt. Underwriters have the option to purchase an additional 882,352 shares.

Share prices climbed to $18.43 around midday Friday, but moderated to around $17.16 later in the day. Shares are trading on the Nasdaq Stock Market LLC under the ticker symbol PLAY.

Founded in Dallas in 1982, Dave & Buster’s is known for its “Eat, Drink, Play and Watch” tagline, where guests can dine, have a beer and watch all NFL games on a bank of TVs, or play interactive games in the Midway. Slightly more than half of the chain’s revenue comes from the amusements side of the business.

The company filed for an IPO in 2011, but pulled back the following year, citing volatility in the market.

Now investors are hungry for growth opportunities in the restaurant space, and Dave & Buster’s is in an even better position to perform, said chief executive Stephen King.

“What resonated this time for investors is that we’ve had nine consecutive quarters of outperforming Knapp-Track,” which tracks same-store sales in the casual-dining segment, King said.

Margins have improved and in July the company refinanced its debt with a new senior secured credit facility that provided $530 million and a $50 million revolving credit facility.

“We did that in a much simpler capital structure in a way that investors were able to understand what it was, and what a low cost of debt we have,” King said.

In 2011, the chain added an enhanced sports bar sub-brand called D&B Sports, with designated seating and décor spotlighting local teams. About half of the chain’s 70 units offer D&B Sports, and all new units include the sports bar format, which King said has resonated with guests.

Projecting annual unit growth of about 10 percent, King said the company sees room for more than 200 Dave & Buster’s locations in the U.S. and Canada.

“There are a number of relatively large markets we haven’t penetrated yet,” he said, noting Seattle, Portland and Tampa. “We only have one store in Boston and in the San Francisco Bay area. We’re looking at new markets as well as further penetrating existing markets.”

Before the end of the year, the company expects to announce a move overseas that will begin a next phase of international growth.

King, who previously headed international development for TGI Fridays, said, “My feeling is that Dave & Buster’s will translate to a number of countries. But it’s all about finding the right partners.”

Dave & Buster’s is considering both franchise development internationally, as well as possible joint ventures, he said.

King said the company has also found success with a variety of footprints, from the relatively smaller 16,000-square-foot models to 66,000 square feet and larger.

“We’re getting great returns across the spectrum,” he said.

In 2013, Dave & Buster’s units averaged about $10.1 million in revenue per location for its same-sales-store base.

Dave & Buster’s ended fiscal 2013 with net income of $2.2 million and revenue of $635.6 million, with same-store sales rising 1 percent for the year.

Same-store sales increased 5.2 percent for the 26 weeks ended Aug. 3, although the company reported a net loss of $2.4 million and revenue of $376.2 million.

Dave & Buster’s was formerly owned by private-equity firm Oak Hill Capital Partners, which acquired the casual-dining chain for $570 million in 2010.

Dave & Buster’s was a public company from 1997 to 2006, when it was taken private by private-equity firm Wellspring Capital Partners III L.P., the chain’s previous owner, along with HBK Main Street Investors L.P.

Jefferies LLC, Piper Jaffray & Co., William Blair & Company LLC, Raymond James & Associates and Stifel are acting as book runners for the offering. LOYAL3 Securities Inc. is co-manager.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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