Starboard CEO Jeffrey Smith becomes Papa John's chairman

Papa John’s starts off the week with a $200 million investment and a new chairman.

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Shares of the company have jumped more than 12 percent in the session, on pace for the biggest percent rise since May 2, 2012.

Investment firm Starboard Value is making the investment and its CEO is becoming chairman of the troubled pizza chain, according to people familiar with the matter.

Starboard secured the board chairmanship for its chief executive, Jeffrey Smith, who founded the firm in 2002.

It also obtained a board seat for Anthony Sanfilippo, former chairman and chief executive of casino operator Pinnacle Entertainment.

Papa John’s Chief Executive Steve Ritchie will also join the board and remain CEO.

In the case of Papa John’s, Starboard sees more opportunities to invest in the brand than to cut costs, according to the Wall Street Journal.

TickerSecurityLastChangeChange %
PZZAPAPA JOHNS INTL61.50+1.25+2.07%

The pizza chain for more than a year has suffered from declining same-store sales, which the company has attributed, in part, to controversies involving its founder and largest shareholder, John Schnatter.

The Papa John’s board Sunday night approved the Starboard deal, which Schnatter voted against it.

Papa John’s plans to use approximately half of the investment proceeds from Starboard to repay debt and the other half to invest in the business.

The deal marks the end of a five-month strategic review that Papa John’s conducted for its business.

Schnatter remains on the board and still owns nearly 31 percent of the stock.

The company didn’t receive serious interest from any parties wishing to buy the whole company, according to other people familiar with the matter.

Public troubles began in November 2017 when Schnatter ignored the advice of his board and, during a quarterly earnings call, blamed the chain’s slowing sales growth on the National Football League’s handling of its players’ national anthem protests.

Schnatter agreed in December 2017 to step down as CEO because of the backlash.

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More trouble came in July of 2018 when news leaked that he had said the “N” word during a marketing call that was intended to prepare him to make public appearances again on behalf of the brand.

Schnatter apologized for his use of the racial slur, saying he didn’t mean it as an epithet, and agreed to step down as chairman.