Embattled Papa John’s Throws A New Hail Mary Play

By CultureBanx Team

  • Trian Fund Management could be interested in a Papa John’s takeover bid

  • Former CEO John Schnatter used the N-word on a marketing call

Shares of Papa John’s (PZZA +0.49%) are climbing out of their tailspin, after reports surfaced that Trian Fund Management could be interested in a takeover bid. After a very tumultuous year when the former CEO made racist comments, sending the stock into free fall, this is likely very good news to investors ears.

Why This Matters: Let’s go back to what started the downfall of the third largest U.S. pizza chain. On a conference call with the marketing agency Laundry Service intended to prevent future public relations snafus, former CEO John Schnatter let the N-word slip. Since news broke, multiple sports teams have cut ties with the pizza chain causing the company’s stock to rapidly decline.

Trian is a notable suitor because of its experience investing in the food industry

Trian is a notable suitor because of its experience investing in the food industry. Currently they own a 13% stake in Wendy’s (WEN +1.18%). In 2011, Trian became the largest shareholder in Domino’s (DPZ +2.38%) Pizza before selling its stake a year later at a profit.

Last November, the then-CEO claimed NFL’s protests against police brutality were affecting pizza sales, a characterization others in the industry pushed back on. Schnatter subsequently resigned as chairman, even though he remains on the board and holds a nearly 30% stake in the company. This makes his cooperation in any potential dealmaking crucial to its outcome.

Papa John’s began soliciting bids from others willing to take over the pizza chain last month. They’re hoping to either find a buyer by the end of October, or arrange alternative financing such as a partial investment.

Situational Awareness: The pizza chain’s also lost a number of promotional partners due Schnatter’s racial epithet. After being dropped as the National Football League’s official sponsor in February, Yum! Brands' (YUM +1.13%) Pizza Hut is now the league's official pizza sponsor. Major League Baseball ended its promotional deal in the wake of the news. Nine MLB teams and Atlanta’s football and soccer teams also pulled marketing deals with the chain.

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