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Papa John’s Moves to Prevent Hostile Takeover From Disgraced Founder

John Schnatter will not be able to increase his 29 percent stake in the pizza company

John Schnatter, formerly of Papa John’s, wears a red zip-up and stands in front of blue and green graphics when ringing the opening bell at NASDAQ.
John Schnatter in 2014
Rob Kim/Getty Images

Papa John’s founder John Schnatter continues his professional downfall, as his pizza company’s board is now attempting to block him from increasing his ownership stake in the chain.

Per the Wall Street Journal, the Papa John’s board adopted a “poison pill” on Sunday, a motion that is occasionally used to keep an investor from gaining a majority stake in a corporation (in particular, to block a hostile takeover); Schnatter currently owns 29 percent of the company’s shares.

Unsurprisingly, the company did not call the move a “poison pill,” issuing an official statement calling it a “limited duration stockholder rights plan,” stating that the action aims to “protect the interests of the company and its stockholders.” An attorney for Schnatter told Bloomberg that the board’s actions are making Schnatter into a “scapegoat,” implying that the company is unfairly treating its founder.

It’s not the board’s first move against Schnatter in recent days: a week before, another vote severed some of Schnatter’s ties to the company, including stripping him of his office at the pizza chain’s Louisville headquarters. The WSJ also reports that the company has suggested that Schnatter should resign from the board. Alternatively, a meeting of shareholders could vote to remove Schnatter from the board.

Much of Schnatter’s undoing stems from an incident earlier this month where he used a racial slur while on a phone call with a public relations agency, ironically as part of an exercise to help Schnatter avoid that exact kind of PR disaster. That led him to resign as company chairman, a move that Schnatter then said he regretted days later. On top of that, Forbes dropped an exposé reporting on a toxic company culture that allowed Schnatter and other men at the company to allegedly harass female staff.

All that comes six months after Schnatter resigned from his position as CEO of Papa John’s following widely-criticized remarks where he blamed the company’s falling sales on NFL players protesting police violence at football games. (At that time, Papa John’s was the NFL’s official pizza, but has since been replaced with Pizza Hut.)

The Schnatter drama is obviously not helping the pizza company: Papa John’s shares continue to drop following the board’s decision.

Papa John’s Adopts Limited Duration Stockholder Rights Plan [Papa John’s]
Papa John’s Founder Used Racial Slur on Conference Call [E]
Papa John’s Founder Resigns After Racist Rant Leaks [E]

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