Papa John’s faces new pressure

Article Excerpt

PAPA JOHN’S INTERNATIONAL INC. $43 (New York symbol PZZA; Consumer sector; Shares outstanding: 31.5 million; Market cap: $1.4 billion; Dividend yield: 2.1%; Takeover Target Rating: Highest; www.papajohns.com) is the world’s third-largest pizza delivery company behind Domino’s Pizza (New York symbol DPZ) and Pizza Hut, part of Yum Brands Inc. (New York symbol YUM). Papa John’s has struggled over the last couple years, partly due to remarks by founder John Schnatter. He blamed poor sales on the NFL’s handling of player protests during playing of the U.S. national anthem. In July 2018, Schnatter used a racial slur on a company marketing call. As a result, he resigned as the company’s chairman and CEO. Following a strategic review, activist investor Starboard Value will purchase $200 million in convertible preferred shares. If those shares are converted, it would own roughly 15% of Papa John’s common shares. As well, Starboard has an option to buy another $50 million in preferred shares by March 29, 2019. Starboard CEO Jeff Smith…