Why This Activist Wants a Slice of Papa John’s

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Papa John’s International Inc. (NASDAQ: PZZA) kicked off Tuesday with a solid gain after news that an activist investor may be interested in the pizza chain. Trian Fund Management said that it is considering a takeover bid for Papa John’s, according to the Wall Street Journal.

This company has been at the center of controversy since founder John Schnatter made controversial comments on a conference call back in July. Not to mention, Schnatter wrote an open letter harshly criticizing executive leadership.

Even before Schnatter’s controversy, Trian co-founder Nelson Peltz brought him to a meeting with Wendy’s executives to discuss a possible deal.

It’s no secret that Schnatter is displeased with how the company is running as is, and with a 30% stake, he could affect some serious change.

In late August, Papa John’s hired Lazard and Bank of America to provide financial advice but it was not looking for a sale, according to a report at CNBC. The just-reported auction seeks potential bidders, including private equity firms, to submit bids by the end of October. There is no guarantee that any bids will be received and, if there are, there’s no certainty that one will be accepted.

Excluding Tuesday’s move, Papa John’s has underperformed the broad markets, with the stock down about 28% in the past 52 weeks. In just 2018 alone, the stock is down 10%.

Shares of Papa John’s closed Monday at $50.42, with a consensus analyst price target of $51.17 and a 52-week range of $38.05 to $72.14. Following the announcement, the stock was up 8% at $54.65 in early trading indications Tuesday.