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Papa John’s secures USD200m strategic investment from Starboard

Starboard Value is making a USD200 million strategic investment in Papa John’s International, with the option to make an additional USD50 million investment through 29 March 2019.


In connection with the investment, the Papa John’s Board of Directors is expanding to include two new independent directors, including Jeffrey C Smith, Chief Executive Officer of Starboard, who has been appointed Chairman of the Papa John’s Board, and Anthony M Sanfilippo, former Chairman and Chief Executive Officer of Pinnacle Entertainment, Inc.
These directors bring substantial experience in the restaurant, retail and hospitality industries, with skill sets spanning operational turnarounds, corporate finance and corporate governance. Their expertise and new perspectives will help support the Company’s strategy to capitalise on its differentiated market position and build a better pizza company for the benefit of its shareholders, team members, franchisees and customers. In addition, Papa John’s President and Chief Executive Officer Steve Ritchie has been appointed to the Board. With the addition of the new directors, the Board will comprise nine directors, seven of whom are independent.
In September 2018, the Company began a process to evaluate a wide range of strategic options with the goal of maximising value for all shareholders and serving the best interest of the Company’s stakeholders. In order to execute the strategic review, a Special Committee comprised of the independent directors of the Board retained Lazard and BofA Merrill Lynch as its financial advisors. After extensive discussions with a wide group of strategic and financial investors, the Board concluded that the investment agreement with Starboard was in the best interest of shareholders.
“Our agreement with Starboard concludes a comprehensive strategic review conducted over the past five months to better position Papa John’s for growth, improve the Company’s financial performance and serve the best interests of our stakeholders. This transaction provides the Company with financial resources and strong and experienced directors on the Board in order to position the Company for success over the long term. We believe we have found terrific partners to advance Papa John’s strategy, especially given their record of reinvigorating and growing premier restaurant and consumer brand companies,” says Olivia Kirtley, a member of the Special Committee and most recently Chairman of the Papa John’s Board. “Starboard’s investment represents a strong vote of confidence in Papa John’s, our people, our franchisees and the many opportunities we have ahead. We are excited to work with Jeff as our new Chairman and look forward to welcoming Anthony and Steve to the Board.”
Ritchie says: “Our agreement with Starboard marks an exciting step forward for Papa John’s. I look forward to working with Jeff and Anthony, as well as the rest of our Board and team, to extend our focus on Better to our people, franchisees and customers in new ways, thereby fortifying Papa John’s position as the ‘BETTER INGREDIENTS. BETTER PIZZA.’ company.”
Smith says: “Papa John’s has always stood for higher quality pizza, and we believe Papa John’s has a strong foundation, with the best product in the space and a strong franchisee and customer base. We applaud the actions that the Board and management have taken to move the Company forward through a difficult transition. We see tremendous potential for the Company both in the US and internationally. We look forward to providing leadership, sponsorship, and support to instil operational, financial, and corporate governance best practices, and working with the Papa John’s team to develop a disciplined long-term strategic plan while delighting our customers every day.”
The company plans to use approximately half of the proceeds of the investment to repay debt, with the remaining proceeds providing financial flexibility that enables Papa John’s to invest capital to further advance its five strategic priorities of People, Brand, Value/Product, Technology and Unit Economics. The company will take a disciplined approach to capital allocation, ensuring that investments in these five areas are directed to its highest return initiatives, with clear parameters and analytics in place to measure and track performance and execution.

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