Papa John's founder to board: Remove 'poison pill' clause
John Schnatter, the ousted founder of Papa John’s Pizza, demanded Monday that the embattled chain’s board of directors reverse a recent measure designed to block him from acquiring a controlling stake in the company.
Papa John’s board of directors enacted the “poison pill” measure last July amid a public war of words with Schnatter, who resigned as chairman after he admitted using a racial slur during a May conference call. The poison pill included a so-called “wolf pack” measure designed to prevent Schnatter, the company’s largest shareholder, from circumventing the poison pill by joining with other investors to gain an effective controlling stake.
Schnatter said he has been approached by “several third parties” about potential investments in Papa John’s, but has been unable to speak with them due to the wolf pack clause. The former pizza executive added that the measure “will lead to significant loss of value for all shareholders.”
“Specifically, I request that you promptly amend the poison pill to remove or otherwise render inapplicable the “Acting in Concert” provisions of the poison pill,” Schnatter wrote to the board. “Among other things, it precludes shareholders from holding any substantive discussions about the company because of the threat of crippling dilutions of their ownership interest in the company.”
Schnatter controls more than 9 million shares of Papa John’s common stock, or roughly 30 percent of the company. The poison pill measure effectively blocks Schnatter from having a stake larger than 31 percent.
When asked about Schnatter's filing, a Papa John’s spokesperson backed the company's “rights plan,” which outlined the poison pill measure earlier this year.
“The independent directors of the Papa John’s Board continue to believe the Rights Plan is in the best interests of the Company and all Papa John’s stockholders,” a Papa John’s spokesperson said in a statement. “As detailed when it was adopted, the Rights Plan does not prevent the Board from considering any offer that it considers to be in the best interest of Papa John’s stockholders. The plan also reduces the likelihood that any person or group gains control of Papa John’s without paying an appropriate control premium to all of the Company’s stockholders.”
Schnatter has a pair of pending lawsuits against Papa John’s related to the board of directors’ handling of his ouster. He has accused Papa John’s executives, including current CEO Steve Ritchie, of manufacturing the racial slur scandal in order to remove him from the company.
Papa John’s has overhauled its marketing campaign since Schnatter’s departure, removing him from all advertisements. The company said Schnatter’s remark last May had a measurably negative impact on its sales.