A Papa John’s store in Durham, N.C. | Courtesy of Wikimedia Commons

Nearly a year after Papa John’s sales first tumbled, which founder John Schnatter blamed on the NFL, the Louisville-based pizza chain looks to be up for sale.

CNBC reported Wednesday that Schnatter is trying to find a private equity partner in the hopes of launching a buyout effort — something Schnatter later denied. But more notable is that Reuters quoted unnamed sources stating that Papa John’s current leadership has opened its ears to acquisition offers.

The company sent out information this week and expects the first round of bids by the end of October, Reuters reported, quoting sources as also saying that a sale isn’t the only option the pizza chain is weighing. Papa John’s hired investment banks Bank of America and Lazard back in August, which some viewed as a sign of a future sale.

Should a sale be the way Papa John’s goes, Alexander Slagle, an analyst with Jefferies, said in a report that the buyer would not likely be publicly owned.

“Based on our conversations with investors, the most frequent view skewed toward private equity/private strategic buyers as the most likely scenario if (Papa John’s) were to be acquired. While many investors think it could make sense for certain public strategic players, negative headlines/sentiment might keep them away,” said Slagle, who listed the stock as “buy.”

He noted that looking at the recent sale of drive-in fast-food chain Sonic, which also is highly franchised and has struggled lately, could give an idea of the value of Papa John’s. Inspire, which also owns Arby’s and Buffalo Wild Wings, reportedly paid $2.3 billion for Sonic, according to Forbes.

As of 10:30 a.m. Thursday morning, Papa John’s shares were trading at $50.65, up just more than 1 percent. Shares had spiked more than 8 percent on Wednesday.

John Schnatter | Courtesy of Papa John’s

In its report, CNBC quoted sources stating that private equity firms are steering clear of Schnatter, who currently owns about 30 percent of the company, because of “reputational risk.”

Through a spokesperson, Schnatter denied that he was trying to buy the company he founded after being ousted earlier this year because of a scandal involving the use of a racial slur.

“John Schnatter has not reached out to or had any discussions with any private equity firm or any other entity about buying Papa John’s,” the spokesperson said. “Any such report about a potential transaction involving Mr. Schnatter is totally and completely false.”

Since his split from the company, Schnatter and Papa John’s C-suite executives and its other directors have been in stuck in a back and forth, with Schnatter claiming that he was wrongfully pushed out and that the current leadership is the reason for the sour sales performance. The board adopted a “poison pill” to prevent a hostile takeover by Schnatter.

Meanwhile, the company heads are trying to distance Papa John’s from Papa John. The company filed plans to change its name to simply Papa Johns, no apostrophe, and has created advertising and an entire website devoted to highlighting others who work for the brand at various levels, eliminating Schnatter’s face from its promotional materials.

During the second quarter of 2018, Papa John’s revenue decreased 5.5 percent, to $835 million, while net income dove 45.6 percent, to $42 million. Same-store sales in North America dropped 6.1 percent.

Caitlin Bowling

Caitlin Bowling

Louisville native Caitlin Bowling has covered the local restaurant and retail scene since 2014. After graduating from the Ohio University’s E.W. Scripps School of Journalism, Caitlin got her start at a newspaper in the mountains of North Carolina where she won multiple state awards for her reporting. Since returning to Louisville, she’s written for Business First and Insider Louisville, winning awards for health and business reporting and becoming a go-to source for business news. In addition to restaurants and retail business, Caitlin covers real estate, economic development and tourism. Email Caitlin at [email protected]


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