Strike Holdings LLC (known as “Bowlmor”) completed its merger with AMF Bowling Worldwide Inc. The new company, known as Bowlmor AMF now becomes the largest operator of bowling centers in the world with 272 bowling centers, 7,500 employees, and combined annual revenue of approximately $450 million.
The transaction stems from AMF’s filing for Chapter 11 bankruptcy reorganization at the end of last year. The new company is jointly owned by Bowlmor, certain of AMF’s second lien lenders including an affiliate of Cerberus Capital Management LP, and Credit Suisse.
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Credit Suisse provided a $260 million credit facility to fund the deal and Bowlmor raised $50 million.
The new company will include three different brands and categories of bowling centers, including Bowlmor Centers, Bowlero Centers and AMF Centers.
In addition, Bowlmor AMF will hold a 50% ownership in Qubica AMF, a leading provider of bowling scoringand pinsetter equipment, lanes, ball returns, pins and other capital and replacement equipment.
At the time of Chapter 11 bankruptcy filing, AMF Bowling operated 262 bowling centers across the United States -- more than three times the number of bowling centers of its closest competitor. It owned about 10% of its centers and leased the remainders.
AMF has been granted bankruptcy court extensions for time to complete the process of reviewing the operations of all its leased facilities. However, in the case of one batch of properties, it has decided to assume leases on only 18 of 67 on which it had completed reviews.
The global recession had a dramatic and lasting impact on AMF’s operations. Between 2008 and 2011, a 3.9% drop in AMF’s revenue resulted in a nearly 33% decline in EBITDA.
That wasn’t the only thing dragging it into reorganization. The ongoing shift away from league play towards more recreational “open” play has also reshaped the bowling industry. According to the United States Bowling Congress, in 1998 the nation’s three largest league bowling organizations had more than 4.1 million members. Just a decade later, membership had declined by 36% to 2.6 million.
Such changes in bowler preferences led AMF to make sustained, multi-year capital expenditures aimed at rehabilitating and upgrading its bowling centers - that is until the recession set in and money dried up.
In 2011, AMF hired Moelis & Company LLC to assist it in marketing and selling substantially all of AMF’s assets. Moelis contacted 168 parties to gauge their interest in a potential purchase. Two potential purchasers that conducted significant diligence were concerned with AMF’s operational flexibility given certain restrictions imposed under AMF’s lease agreements with affiliates of iStar Financial Inc. on 186 of AMF’s bowling centers.
AMF sold the centers to iStar in 2004 for $254 million and leased the centers back.
Discussions and documents relating to iStar related agreements were sealed by the bankruptcy court.
Overall, bowling center acquisitions have been increasing since 2010, according to CoStar COMPs. The number of deals totaled 35 in 2010, 51 in 2011, 56 in 2012 and 19 so far this year. Dollar volumes have gone up from $39 million in 2010 to $60 million in 2012, but the price per square foot has remained static at about $46.
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