Papa John’s founder John Schnatter has asked the company’s board of directors to roll back provisions in the “poison pill” document it adopted that would allow him to talk about the company, his investment in it and with potential investors and other shareholders about their plans.
“It is important that the shareholders of the Company be allowed to communicate their concerns about the Company freely and effectively at this critical time. Among other things, the leadership changes which have occurred over the past several weeks are cause for deep concern for the future of the Company and its direction,” Schnatter wrote in a letter to the board of directors dated Oct. 18. “The leadership team that Steve Ritchie established is crumbling, and now he is promoting the wrong people and losing long-term employees who provided the essence of what Papa John’s was created to do – provide customers with better ingredients and better pizza.”
The company recently announced that it had promoted Mike Nettles from senior vice president and chief information and digital officer to executive vice president and chief operating and growth officer, among several other promotions.
In the letter filed with the U.S. Securities and Exchange Commission Monday, Schnatter stated, “the Board must cease this ongoing infringement on shareholders’ rights through an amendment to the Poison Pill making clear that the Board has no authority to preclude its shareholders from conversing freely and fully regarding the Company, the issues the Company faces and the Company’s future.”
Schnatter, who owns a 30.9 percent stake in the company, argued that the “Acting in Concert” provisions reach beyond what is allowed by Delaware law and would not hold up in court.
In morning trading, shares were slightly higher, trading at $52.91.
“It precludes shareholders from holding any substantive discussions about the Company because of the threat of crippling dilution of their ownership interest in the Company,” Schnatter wrote.
He added that Papa John’s is considering acquisition proposals and other possible strategic investments and that he should be allowed to speak with other shareholders about it. Schnatter also stated that he’s been approached by “several third parties.”
It is not likely that Schnatter will get his request without a court ruling in his favor on the subject.
“The independent directors of the Papa John’s Board continue to believe the Rights Plan is in the best interests of the Company and all Papa John’s stockholders,” according to an emailed statement from Papa John’s. As detailed when it was adopted, the Rights Plan does not prevent the Board from considering any offer that it considers to be in the best interest of Papa John’s stockholders. The plan also reduces the likelihood that any person or group gains control of Papa John’s without paying an appropriate control premium to all of the Company’s stockholders.”
Earlier this month, Schnatter was in Delaware court testifying as part of a lawsuit he filed against Papa John’s leaders over access to documents.