Shares of Papa John’s International Inc. rose by more than 6.5 percent Tuesday morning on reports that Trian Fund Management LP was considering taking over the troubled pizza delivery chain.
The Wall Street Journal, quoting “people familiar with the matter” reported that Trian, headed by activist investor Nelson Peltz, had requested information from Papa John’s so it could consider a takeover.
Spokespeople for Trian and Papa John’s said they didn’t comment on rumors. A spokeswoman for Papa John’s founder and former CEO John Schnatter said that he also had no comment.
The rumors aren’t the first linking Peltz and Papa John’s. The Journal also reported in July that Wendy’s, whose chairman is Peltz and whose largest shareholder is Trian, was in talks with Schnatter before he resigned as chairman of the board in July, following reports that he had used a racial slur in a meeting.
Schnatter is still a director of Papa John’s and owns about 30 percent of its shares. Shortly after resigning as chairman he expressed regret at his decision, saying he was forced out. Since then he has been in an acrimonious battle with the current management of the Louisville, Ky.-based pizza chain, headed by Schnatter’s chosen successor, Steve Ritchie.
Any takeover of the chain would be difficult without the approval of its board of directors, which in July adopted a “poison pill” that would allow current shareholders to buy more shares at a discount in the event of an unauthorized takeover attempt, thus making such an attempt much more expensive.
Papa John’s, which is the third largest pizza chain in the world — behind Domino’s and Pizza Hut — has more than 5,000 locations worldwide.
Same-store sales at its domestic stores were down by 6.1 percent in the quarter ended July 1, 2018, and fell by 10.5 percent in July amid negative response from consumers over Schnatter’s reported comments, the company said.
A July report by Forbes, painted a picture of a toxic corporate culture at Papa John’s, including a litany of inappropriate behavior from upper management.
Since then, Papa John’s has moved to repair its reputation with an ad campaign promoting its diversity. Ritchie also has appointed a special committee of all of Papa John’s directors except for Schnatter, to investigate the company’s culture and address any sensitivity issues.
Papa John’s shares have been in play for the past couple of weeks amid rumors the chain is up for sale and with the purchase of shares last week by activist shareholder Legion Partners Asset Management LLC.
Contact Bret Thorn at [email protected]
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