Trian Considers a Bid for Papa John’s

WSJ
An image of founder John Schnatter on a Papa John's pizza box.
An image of founder John Schnatter on a Papa John’s pizza box. Photo: Luke Sharrett/Bloomberg News

Trian Fund Management LP is evaluating a takeover bid for Papa John’s International Inc., PZZA 0.14% people familiar with the matter said.

The activist hedge fund recently contacted the pizza chain to collect information as it explores a possible bid, the people said. Trian is one of several parties to express interest since Papa John’s put itself up for sale amid an acrimonious fight with its founder, John Schnatter, who remains on the board and owns nearly 30% of the company’s shares.

There is no guarantee that Trian will make an offer or that Papa John’s will ultimately be sold. There are several other potential bidders, some people familiar with the situation added, including companies and private-equity firms.

Papa John’s is the world’s third-largest pizza delivery chain after Domino’s Pizza Inc. DPZ -0.94% and Yum Brands Inc.’s Pizza Hut. The Louisville, Ky., company that Mr. Schnatter founded in 1984 has more than 5,000 locations in 45 countries.

Trian, which owns a roughly 13% stake in Wendy’s Co. and holds three seats on the burger chain’s board, is known for working with the management of struggling companies. Nelson Peltz, Trian’s co-founder and Wendy’s chairman, invited Mr. Schnatter in late June to meet the burger company’s leaders to discuss a possible deal.

Mr. Schnatter brought Papa John’s chief development officer, Tim O’Hern, with him to the June meeting rather than Chief Executive Steve Ritchie, with whom he was fighting, according to people familiar with the matter. Messrs. Schnatter and O’Hern flew by helicopter to meet Wendy’s Chief Executive Todd Penegor at a private airport in Columbus, Ohio, where Wendy’s is based. Mr. Schnatter, wearing a red shirt emblazoned with the Papa John’s logo, wanted to know how many seats he would have on the board of a combined company, according to one person familiar with the meeting.

Mr. Schnatter stepped down as chairman in July after reports leaked that he had used a racial slur on a company marketing call.

Mr. Schnatter’s relations with the board and management began to unravel last fall, when he drew criticism on social media for blaming Papa John’s poor sales on the National Football League’s handling of players’ protests during the national anthem. He resigned as chief executive in December.

Mr. Schnatter and the company have since been engaged in a public battle over who is to blame for declining pizza sales. The company recently retained bankers to help it conduct a strategic review.

Should Trian proceed with a bid for Papa John’s, it isn’t clear whether Wendy’s would acquire the pizza chain or whether Trian would purchase and operate the chain separately.

Analysts have said Papa John’s, which has a market value of about $1.6 billion, could be attractive to a company that can focus on building a strong brand, as Wendy’s has done. Wendy’s, the world’s third-largest hamburger chain, is known for snarky social-media posts that take aim at rivals and for emphasizing fresh ingredients.

Papa John’s is trying to focus on the quality of its pizza and distance itself from Mr. Schnatter. For years the chain’s marketing was tied closely to Mr. Schnatter, whose image was on its pizza boxes. The recent controversies have led the company to remove him from ads.

Trian has a history with pizza. The firm in 2011 became Domino’s largest shareholder and met with management to make strategic suggestions. It sold its stake the following year after Domino’s updated its menu and marketing materials and made other improvements, according to Trian’s website.

Trian doesn’t typically look to buy companies outright, but it bought Wendy’s in 2008 and combined it with Arby’s, which it owned through holding company Triarc Cos.

Another activist investor drawn recently to Papa John’s wants executives to improve the business before considering a sale. Legion Partners Asset Management LLC and the California State Teachers’ Retirement System last week disclosed a 5.5% stake in Papa John’s.

Ted White, a Legion managing director, said the chain should sell more U.S. stores to franchisees and cut costs while setting aside differences with Mr. Schnatter.

Papa John’s board in July adopted a “poison pill” provision to prevent Mr. Schnatter from regaining control of the company.

Write to Julie Jargon at julie.jargon@wsj.com, Cara Lombardo at cara.lombardo@wsj.com and Dana Mattioli at dana.mattioli@wsj.com

https://www.wsj.com/articles/trian-considers-a-takeover-bid-for-papa-johns-1539037437?mod=pls_whats_news_us_business_f

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