On Monday, Papa John’s announced hedge fund Starboard Value is investing $200 million with a potential $50 million more by March 29. Starboard’s CEO, Jeffrey Smith, is Papa John’s new chairman and he’s adding Anthony Sanfilippo, former CEO of Pinnacle Entertainment, to the board.
The investment will be a turning point for the struggling pizza company. Last August, Founder John Schnatter resigned as chairman after he used a racial slur during a conference call. Papa John’s reacted with an advertising campaign and an internal audit on diversity and inclusion practices. Schnatter blasted the company, calling CEO Steve Ritchie the wrong man for the job.
Schnatter’s PR damage? Sales fell 9.8% by September. Revenue at 1-year-old U.S. stores fell 8.1% in Q4 and 10.5% in January.
Good news: Smith sees “tremendous potential” for Papa John’s. As the previous chairman of the board for Darden Restaurants, Smith boosted sales at Olive Garden after wide criticism. Shares have since raised 13% higher in early trading.
Interestingly, Schnatter submitted a proposal to the board for an investment up to $250 million but withdrew in light of Smith’s deal.
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