The Papa John’s (NASDAQ: PZZA) board of directors is taking action to prevent the company’s founder, John Schnatter, from taking control of the company. The board has created a limited-duration stockholder rights plan it says is designed to “protect the interests of the company and its stockholders by reducing the likelihood that any person or group gains control of Papa John’s through open market accumulation or other tactics without paying an appropriate control premium.” The plan has a 15 percent trigger to deter existing stockholders from amassing a controlling stake.
The board also declared a dividend distribution of one right for each outstanding common share. According to a statement from the company, Schnatter and his affiliates and associates who currently beneficially own common shares in excess of 30 percent have been grandfathered under the Rights Plan. The rights plan expires on July 22, 2019 and the record date for dividend distribution is Aug. 2.
The action was taken after Schnatter made some provocative statements about his recent resignation as chairman of the board. He has said he regrets resigning from his post and that it was a mistake. He has since hired a law firm to represent his interests in his dealings with the company.
Schnatter founded the company in the 1980s while making pizzas for customers in his father’s tavern. Since then, the company has grown to more than 5,200 locations, many of them franchised. Schnatter has been the face of the company since its inception, performing in its TV commercials and appearing prominently in the company’s logo.
Earlier this month, Schnatter resigned his role as chairman after he admitted to using a racial slur during a May conference call with a marketing agency. Schnatter has admitted to using the word, but claims that he was pushed to do so. He has also claimed that the agency attempted to extort him over the matter.
After the matter became public, a special committee of the board barred Schnatter from talking to the media and evicted him from the space he was using as offices at its headquarters. The committee also voted to remove Schnatter’s likeness from the company’s logo as a way of creating distance from the controversy. Schnatter still owns 29 percent of the company and remains a director on its board.