Papa John’s taps investment banks amid pressure from founder: sources

The Papa John's store in Westminster, Colorado, U.S. August 1, 2017. REUTERS/Rick Wilking

NEW YORK (Reuters) - Papa John’s International Inc PZZA.O, the world’s third-largest pizza delivery company, has hired Bank of America Corp BAC.N and Lazard Ltd LAZ.N to help find ways to stabilize the restaurant chain, which has come under pressure from its founder John Schnatter, people familiar with the matter said on Friday.

Schnatter, who owns about 30 percent of Papa John’s, resigned as chairman in July following reports that he had used a racial slur on a media training conference call. He is trying to regain control of the company, which has adopted a so-called poison pill to fend off any potential hostile takeover bid. The banks are at still at the early stage of working with Papa John’s to assess its options, and there is no wider exploration of strategic alternatives or sale process currently underway, the sources said.

The pizza chain has attracted some takeover interest from other companies and private equity firms following Schnatter’s departure, and the banks will assist the company if there is an acquisition offer to consider in the future, one of the sources added. The sources asked not to be identified because the matter is confidential. Papa John’s, Lazard and Bank of America declined to comment. Schnatter could be not immediately be reached for comment.

Papa John’s shares jumped as much as 5.5 percent to $45.07 on the news, giving the company a market capitalization of more than $1.4 billion.

Earlier this month, Papa John’s posted a second-quarter comparable sales decline of 6.1 percent and cut its sales forecast, citing fallout from the company’s split with Schnatter. Negative publicity surrounding Schnatter depressed July traffic in North America, the company said at the time, noting that it was hard to predict how long and how badly that would affect sales. Papa John’s has more than 5,000 locations worldwide, mostly franchised restaurants.

Papa John’s Chief Executive Officer Steve Ritchie vowed earlier this month to move beyond the fight with Schnatter with a new advertising and marketing campaign, while also removing Schnatter’s image from company promotions. Two franchisee associations working with the company have expressed support for its strategy.

Ritchie, who was previously Papa John’s president, took over as CEO in January after Schnatter came under fire in November for criticizing the National Football League’s leadership over national anthem protests by its players.

Reporting by Harry Brumpton and Greg Roumeliotis in New York; Editing by Tom Brown and Susan Thomas