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Is a merger still in Papa John’s future?

John Schnatter told Fox Business that he talked with Wendy’s about merging—and that the chance of a deal has increased since the recent CEO change, says RB’s The Bottom Line.
Photograph: Shutterstock

the bottom line

John Schnatter held talks with Wendy’s about a potential merger between the burger chain and Papa John’s before his ignominious ouster from the chain he founded.

And he believes the chance of a potential deal has increased since the chain named former Arby’s President Rob Lynch to be its new CEO.

“We did have a conversation with Wendy’s,” the former Papa John’s chairman said in a wide-ranging interview with Maria Bartiromo on the Fox Business Network on Monday. “Well, you’ve got to look at what is the synergies between the two companies. Purchasing power, marketing power, technology.”

As for the chance of a potential deal with Wendy’s, he said, “the odds have gone up with Rob Lynch in the picture because he comes from Arby’s.”

The interview with Fox Business is the most extensive Schnatter has done since his resignation more than a year ago.

It also comes as Schnatter has sold roughly half of his stock in the company he founded, which he called something of a “hedge” on the chain. Would he sell any more? “Depends on what happens. Every day is a different day at Papa John’s.”

It's worth noting, by the way, that Schnatter is no longer an executive with the company, nor is he a director, having gradually stepped aside from all of his roles at Papa John's. At the same time, he remains its largest shareholder even after selling so much stock

Reports soon after Schnatter resigned indicated that he had been talking with Wendy’s about a potential merger, and his comments clearly confirmed that.

Whether it’s Wendy’s or not, there is a decent chance that Papa John’s will find itself an acquisition target in the coming years, especially if the chain is able to speed its recovery.

(Side note: While a Wendy’s-Papa John’s combo makes sense, don’t discount Burger King owner Restaurant Brands International, long believed to covet Papa John’s, and Lynch’s former employer, Arby’s owner Inspire Brands.)

“He’s going to have to find a 3G or somebody that wants to take over,” Schnatter said.

Schnatter defended himself vigorously during the interview, arguing that his firing was a “farce,” that his comments on an earnings call regarding NFL player protests were misconstrued and that he didn’t utter any racial slurs.

Schnatter doesn’t like a lot of what has happened this year with the company he founded.

“I don’t like the culture,” he said. “I don’t like the momentum. The recipes have been changed, that bothers me. And I don’t like the fact that the managers in the stores are not making a bonus. When I was there everybody made a bonus. We were aligned from the store manager to the janitor to accounts receivable, all the way up.”

He said that the “franchisees and the employees are not in a good place right now” and that he’ll do “whatever it takes in my power to help get the employees and the franchisees back on their feet.”

Schnatter does, however, think the chain’s deal with Shaquille O’Neal was the right move. “I like that,” he said. “Shaquille sits on the board. The board and chairman of the board report to the shareholders.

“I’m just hoping with Shaq on the board that he upholds his fiduciary duties and he sells a lot of pizza.”

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