Papa John’s hires Bank of America and Lazard for stabilization amidst racial fallout

USA – The third largest take-out and pizza delivery restaurant chain in the United State, Papa John’s has hired the investment institution Bank of America and financial advisory firm Lazard to stabilise the restaurant chain in a bid to defend the company from any unprecedented takeover bid, Reuters reports.

According to people familiar with the matter, the company is dealing with pressure from the founder John Schnatter, who stepped down as chairman following racist comments that hit on its valuation and shares few months ago.

He is said to be trying to regain control of the company but the latter is struggling to prevent any possible ‘hostile’ takeover bid.

The investment and advisory firms are charged to assess Papa John’s options although there was no wider exploration of strategic alternatives or sale process.

The banks will also assist the company if there is an acquisition offer to consider in the future given some takeover interest from other companies and private equity firms.

Surge from racial spat

Schnatter, who owns about 30% of Papa John’s was under pressure for using a racial slur on a media training conference call, prompting his resignation in July.

His racist remarks were attributed to the use of the ‘N-word’ considered to be inappropriate and hurtful language but he later apologized during a May conference call after Forbes magazine reported the incident.

He had earlier stepped down as CEO of the pizza chain on controversial comments he made about the National Football League’s (NFL’s) handling of the anthem protests.

This resulted to not only a decline in stock but also hit hard on the shares of the pizza chain.

In the second quarter, Papa John’s posted its third consecutive quarterly sales decline as it struggled to recover from the public relations crisis.

Same-store sales in North America fell 6.1% attributing the decline to the racial spat, saying they were reviewing the company’s culture in line with the ‘recent events’.

The company lowered its outlook for same-store sales for the year, expects sales at stores open for at least a year to fall between 7% and 10% this year, citing fallout from the company’s split with Schnatter.

“On the marketing front, the research and analysis we conducted after the NFL comments by our founder in November of 2017 have made it clear that we needed to move away from a founder-centric marketing plan,” said current CEO Steve Ritchie during a conference call.

“Obviously, the recent events have further evidenced that we need to move on.”

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