Papa John’s board voted to adopt a ‘poison pill’ aimed at preventing
founder John Schnatter from getting a controlling stake in the company.
FBN’s Cheryl Casone with more.
Papa John’s Pizza shares plunged in trading Monday as the embattled
chain’s board of directors took special measures to stave off a potential
takeover bid from ousted founder and company namesake John Schnatter.
The “poison pill” measure will prevent any entity from acquiring more than
15% of Papa John’s common stock without approval from the board of
directors. The provision will expire after one year, the company said in a
The move is designed to prevent Schnatter, the company’s largest
individual shareholder, from acquiring a larger stake than the roughly 30%
of shares he already owns. Schnatter resigned as company chairman after he
admitted using a racial slur during a May conference call with marketing
executives, but has vowed to fight any effort to remove him from the board
of directors entirely.
Papa John’s said the plan was meant to “protect the interests of the
company and its stockholders by reducing the likelihood that any person or
group gains control of Papa John’s through open market accumulation or
other tactics without paying an appropriate control premium.
The company’s stock was down nearly 9% in trading as of early Monday
afternoon as Wall Street reacted to the looming battle between Schnatter
and the board of directors.
Wendy’s reportedly engaged in talks with Schnatter before his ouster on a
potential acquisition bid for the struggling pizza chain, which has lost
market share to rivals Pizza Hut and Domino’s in recent months. Both
Wendy’s and Papa John’s declined to comment on the talks.
Research firm Stifel cut its rating for Papa John’s stock to sell, arguing
that Papa John’s “[needs] a strategic savior but [is] struggling to find
one willing to underwrite a transaction given the brand damage.”
Schnatter has accused marketing firm Laundry Service of attempting to
extort him for $6 million in order to keep his use of a racial slur during
a media training session from going public. Laundry Service strongly
denied Schnatter’s accusations in an internal memo to staffers.
Schnatter owns more than nine million shares of Papa John’s stock.
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