Coverage: Papa John’s founder may sell 31% stake

After resigning from his company’s board of directors earlier this year, Papa John’s founder John Schnatter notified federal regulators this week that he’s open to selling his stake in the international pizza chain.

Grace Schneider of the Louisville Courier Journal had the news:

According to a U.S. Securities and Exchange Commission filing on Monday, Schnatter has enlisted unidentified financial advisers for help selling some or all of his stake in the company, which totals about 9.9 million shares, nearly 31% of the Louisville-based company.

Papa John’s announced in March it had reached an agreement with Schnatter in which he would resign from the board of directors and have a say in picking an independent director to take his place.

In exchange, Schnatter agreed to drop pending lawsuits against the company in Delaware, where the company is incorporated, and in Jefferson County. The company and Schnatter have not chosen a new director.

The world’s third-largest pizza chain with more than 5,000 stores and 1,200 employees at its eastern Louisville headquarters has been locked in a contentious squabble with its founder for the past year.

Amelia Lucas of CNBC.com reported that the company has been trying to turn the business around:

Schnatter and Papa John’s have discussed appointing a new independent director but have not made a decision yet, according to the filing.

Papa John’s has been taking steps to turn the business around. In February, activist hedge fund Starboard Value invested $200 million in the chain and named its chief executive, Jeffrey Smith, as new chairman. As part of its strategy to repair its image with U.S. customers, Papa John’s added retired basketball star Shaquille O’Neal to its board and has plans to make him the new face of the brand.

Shares of the company, which has a market value of $1.7 billion, are up 34% so far this year. They were down 1% in Tuesday’s premarket.

Joanna Fantozzi of Nation’s Restaurant News reported that the sale would further distance Schnatter from the company:

The move would mark further separation of Schnatter and the company, which have been mired in legal battles and public relations problems for a year and a half as Schnatter’s influence at the company waned.

Schnatter stepped down as CEO in December 2017 following a controversial comment during an earnings call in which he blamed NFL protests for his company’s struggles. Last summer, reports of racist language and behavior, including use of racial slurs during a media meeting, led to his resignation as executive chairman. Last month, he agreed to exit the company’s board.

Related: Papa John’s accepts $200 million Starboard investment

The company, meanwhile, has been working to distance itself from Schnatter and to regain the trust of investors and customers.

In February 2019, Papa John’s announced a $200 million investment from hedge fund Starboard Value LLP and subsequent rejection of a similar offer from Schnatter. The following month, Schnatter reached a settlement with his former company, agreeing to drop all legal claims against Papa John’s, including a lawsuit that had sought to nullify the “wolfpack” provision part of the poison pill agreement that prevented him from working with potential Papa John’s buyers.