Papa John's Adopts Poison Pill To Prevent Schnatter From Taking Control

(RTTNews) - Papa John's International Inc.'s (PZZA) board has adopted a shareholder rights plan or poison pill strategy to prevent its controversial founder John Schnatter from gaining control of the pizza chain.

Papa John's board announced the approval of a limited duration stockholder rights plan and declared a dividend distribution of one right for each outstanding share of common stock. The record date for such dividend distribution is August 2, 2018.

In a press released, the company said "the adoption of the Rights Plan is intended to enable all Papa John's stockholders to realize the full potential value of their investment in the company and to protect the interests of the company and its stockholders by reducing the likelihood that any person or group gains control of Papa John's through open market accumulation or other tactics without paying an appropriate control premium."

Papa John's board has been trying to cut off its relationship with Schnatter after the recent controversy that he used a racial slur during a conference call.

Schnatter, who founded Papa John's 34 years ago, owns 29% of Papa John's shares. He has also said he would not give up the control of the company without a fight.

Boards can adopt shareholder rights plans, colloquially known as poison pill, as defensive strategy to prevent an investor buying a major stake in a company. Such a plan allows shareholders the right to buy more shares at a discount if one shareholder buys a certain percentage or more of the company's shares.

Schnatter was pressured to resign as chairman after he used a racial slur during a conference call that was arranged between Papa John's executives and marketing agency Laundry Service. It was designed as a role-playing exercise and public relations training for Schnatter after his withdrawal from ads in the wake of a dust-up with the National Football League.

He publicly apologized for his use of the word and agreed to step down as board chairman earlier this month but said he has since second-guessed his decision. He explained in a letter to the board last week that he wasn't a racist and didn't use the word as a racial epithet.

Schnatter's attorneys are challenging the termination of those agreements.