February 1, 2019
By Greg Roumeliotis
(Reuters) – Papa John’s International Inc, the world’s third largest pizza delivery company, is pursuing the sale of a stake in itself after acquisition offers from private equity firms did not meet its valuation expectations, people familiar with the matter said on Friday.
Any such deal would come amid a battle for control of Papa John’s with the chain’s founder John Schnatter, who owns about 30 percent of the company. Schnatter resigned as chairman last July following reports that he had used a racial slur on a media training conference call. He retains a seat on the company’s board.
The transaction, which could be structured as a private investment in public equity, would boost Papa John’s finances, the sources said, as the company seeks to recover from low franchisee profitability and boost its sales through promotional discounts.
Shares of Louisville, Kentucky-based Papa John’s dropped 6.2 percent at $39.63, giving the company a market capitalization of about $1.2 billion.
There is no certainty that Papa John’s will agree to any deal, the sources said, asking not to be identified because the matter is confidential. Papa John’s declined to comment.
Reuters reported in October that several buyout firms had shown interest in acquiring Papa John’s, including Bain Capital, CVC Capital Partners, KKR & Co Inc and Roark Capital. None of them proposed a deal that the company would accept.
Papa John’s Chief Executive Officer Steve Ritchie has vowed to move beyond the fight with Schnatter with a new advertising and marketing campaign, while also removing Schnatter’s image from company promotions.
Schnatter has been seeking internal documents to try to show the company was mismanaged and to determine if he was improperly pushed out.
Last month, Chancellor Andre Bouchard of Delaware Court of Chancery ordered the company’s directors to give Schnatter documents and communications, including text messages on personal devices, related to his firing. The order covered some messages between directors and their lawyers.
Both sides said they were pleased with the ruling. The company noted the judge narrowed the scope of the document requests, while Schnatter called it a vindication of his right to the information.
It remains unclear whether Schnatter will put forward a slate of board nominees to take control of Papa John’s. The company typically holds its annual shareholders meeting in May, during which directors are elected.
(Reporting by Greg Roumeliotis in New York; Additional reporting by Joshua Franklin, Mike Spector and Jessica DiNapoli in New York; Editing by Phil Berlowitz and Jeffrey Benkoe)