John Schnatter on Tuesday said that he has reached an agreement with Papa John’s that will pave the way for his exit from the company’s board, completing his gradual departure from the company he founded that began with his resignation as CEO more than a year ago.
The Louisville, Ky.-based pizza chain’s estranged founder said he has agreed to drop his lawsuit against the company and find a “mutually acceptable independent director” to serve on the board in his place. Schnatter is still Papa John's largest shareholder, with 26% of company stock.
Schnatter also agreed to withdraw his notice that he would run for election to the board at the company’s annual meeting later this year.
In exchange, Schnatter said that Papa John’s agreed to remove a provision from its poison pill forbidding shareholders from “acting in concert.” The poison pill was designed to keep shareholders, seemingly Schnatter, from taking control of the company by acquiring shares on the open market.
He also said the company has agreed to drop a requirement that Starboard Value vote its shares in favor of Papa John’s own board nominees. Starboard agreed to invest $200 million last month into the company, a deal that made Jeff Smith, the activist investor’s CEO, Papa John’s chairman.
“I founded Papa John’s, built it from the ground up and remain its largest shareholder,” Schnatter said in a statement. “I care deeply about its employees, franchisees and investors and am thankful that I’ve been able to resolve these important issues, and that we can all focus on the company’s business without the need for additional litigation.”
The deal seems to put to rest an ongoing dispute between Papa John’s and Schnatter, which had emerged since the founder stepped down as the company’s chairman in July after admitting to have made a racial slur during a conference call.
That call was designed to help Schnatter avoid public relations mistakes, following his comments during an earnings call in November 2017 in which he seemed to blame NFL player protests for the league’s low TV ratings and his chain’s weak same-store sales.
Papa John’s same-store sales plunged last year, leading operators to close stores and forcing the company to take the Starboard investment so it could pay down debt and invest in sales-building strategies.
Papa John’s did not respond to a request for comment on Tuesday morning.
Schnatter on Tuesday said that the agreement provides him with access to documents related to his departure from the company. Schnatter said he reserves the right to file additional lawsuit if “those documents reveal additional wrongdoing.”
But Schnatter also said he is “eager to work with Jeff Smith and Starboard to identify a new member of the board.”
“I’m happy we were able to enter into this agreement and allow the new leadership being implemented by Jeff Smith and Starboard to help Papa John’s regain its strength and market position,” Schnatter said.