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Papa John’s stock surges on reports of investor’s interest

Trian Fund, one of Wendy’s biggest shareholders, is reportedly eyeing the pizza chain, sending the stock soaring.
Photograph by Shutterstock

Another sale report has lifted Papa John’s stock.

On Monday, the Wall Street Journal reported that Trian Fund Management, a large shareholder in Wendy’s and an activist investor, is considering a bid for the beleaguered pizza chain. The report said “several parties” have expressed an interest in making a bid.

That sent Papa John’s stock up as much as 15% in after-hours trading. 

Media reports last week indicated that the Louisville, Ky.-based pizza chain had asked potential buyers to submit bids. Last week, an activist investor, Legion Partners, revealed that it had bought a stake in the company and planned to push for changes.

Representatives for Trian Fund, Papa John’s and the company’s founder, John Schnatter, all declined comment.

The report seems to confirm that Papa John’s is exploring a sale process and that buyers are apparently taking a look at a company beset by controversy and falling sales all year.

Trian Fund is an activist hedge fund, meaning it buys a stake in target companies and then works for change.

But Trian does have a long history in the restaurant business and is unafraid to make an outright purchase. The fund owned Arby’s through a holding company in 2008 when it bought Wendy’s and merged the two chains—eventually selling the latter concept to Roark Capital.

Wendy’s had been talking with Schnatter himself over the summer about a potential merger between the two brands before the controversy surrounding the founder and former chairman deepened.

That controversy first emerged last November, when Schnatter appeared to blame protests by NFL players for weak ratings and his own chain’s weakening same-store sales. In December, he stepped down as CEO, ceding the job to Steve Ritchie. Then, in July, he acknowledged making a racial slur during a conference call and stepped down as chairman.

The company then removed Schnatter from its marketing and its logo.

Schnatter has since said his comments have been misconstrued and has filed multiple lawsuits against the company. And he blames the weakening same-store sales, including a 6.1% decline in the second quarter and 10% in July, on company management.

According to the Journal, potential buyers include both private equity firms and companies, in addition to Trian.

But any purchase could have to go through Schnatter, who still owns 30% of the company, making him by far its largest shareholder. He has said he wants a role with the company he founded.

Papa John’s in July adopted a “poison pill” provision designed to keep him from making a hostile takeover of the company.

The controversy, weak sales and subsequent dispute cut half of the value from Papa John’s stock, though it is up more 47% off its 52-week lows as investors speculate that the chain could be sold and the company took steps to shore up its marketing and its franchisee base.

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