Papa John's Board Reportedly Votes To Adopt 'Poison Pill' Against Founder

(RTTNews) - Papa John's International Inc.'s (PZZA) board members voted to adopt a "poison pill" on Sunday to prevent its controversial founder from gaining a controlling interest in the pizza chain, the Wall Street Journal reported citing people familiar with the matter.

The board, which is expected to announce the poison pill Monday morning, has been trying to sever ties with John Schnatter, who founded Papa John's 34 years ago, following revelations that he used a racial slur during a recent conference call.

Schnatter owns 29% of Papa John's shares and has indicated that he won't cede control of the company without a fight.

Boards can adopt shareholder-rights plans, commonly known as poison pills, to block an investor from accumulating a majority stake in a company—a defensive move intended to thwart a hostile takeover. They are usually employed to block activist shareholders from gaining more control.

Schnatter used the N-word in May during a conference call with his marketing agency that was intended to prepare him for his return as company spokesman. 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.

Papa John's board last Sunday voted to terminate some of its ties with Mr. Schnatter, including one that allows him use of an office at the company's headquarters in Louisville, Ky. Mr. Schnatter's attorneys are challenging the termination of those agreements.

The company also has suggested Schnatter resign from the board, the report said.