Papa John’s Board Considers ‘Poison Pill’ to Block Takeover by Disgraced Founder
The board of pizza chain Papa John’s is considering a measure to block founder John Schnatter from regaining control of the company.
As reported by the Wall Street Journal, the board may vote Sunday on a shareholder rights plan, or so-called “poison pill” provision. Though such provisions vary in details, they are fundamentally designed to prevent hostile takeovers through stock dilution.
Schnatter, according to the Journal, currently owns 29% of the pizza chain he founded, making him the largest single shareholder and putting him in a position to gain a majority stake and regain control of the company.
That vastly could worsen damage already inflicted by Schnatter in a string of controversies over the past year. Schnatter stepped down as CEO in late 2017 after comments critical of the NFL’s handling of national anthem protests. The comments likely contributed to the end of a major Papa John’s sponsorship with the league. A laundry list of other leagues and teams have followed suit in cutting ties with the company.
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During a subsequent media training session intended to prevent future controversies, Schnatter, while trying to argue that he is not a racist, used a racial epithet and told an anecdote that others described as offensive. Following reports of that call, Schnatter resigned from his role as chairman, and early last week, the Papa John’s board removed him from office space he leased at company headquarters.
However, Schnatter has since said he was wrongly asked to step down, and has retained a high-profile attorney. In that light, a board measure to prevent him from regaining ownership control may be in the best interest of other shareholders—thanks in part to Schnatter’s string of controversies, Papa John’s stock is currently down 17% since early November 2017.