Papa John’s Implements Shareholder Rights Plan

Pizza chain company Papa John’s International, Inc. has recently implemented a shareholder rights plan to distance itself from its founder and rebuild its image. The new rights plan was established in July after the resignation of John Schnatter [SHNAH-ter], Papa John’s founder and former CEO. Called “poison pill,” the rights plan requires board approval for shareholders who want to own greater than 15% of the company’s shares. It also stops shareholders from taking control of the company without the board’s consent. Schnatter resigned as Papa John’s CEO in July following a report about how he made a racist remark in a conference call last May. When news of Schnatter’s controversy broke out, Papa John’s stocks decreased dramatically. With the rights plan, the company hopes to deter Schnatter from increasing his control over Papa John’s. The company also expects that by distancing itself from Schnatter, it can reestablish its reputation and regain public confidence. Aside from implementing the “poison pill,” the pizza chain also plans to remove Schnatter as its representative in marketing. This removal will prohibit the founder from making media appearances on behalf of the company. In addition, the pizza chain will stop using Schnatter’s image on every Papa John’s pizza boxes. While some financial analysts claim that the negative publicity surrounding Papa John’s has irrevocably damaged its brand, other analysts believe that the company’s prospects will still improve. For instance, investment banking group Jefferies [JEFF-rees] continues to encourage investors to buy shares of Papa John’s. Analysts from Jefferies stated that Papa John’s only needs to weather the storm and that its stocks will recover in a few quarters.