Papa John gets a $200 million investment from the hedge fund Starboard Value and names its CEO as its chairman

  • Papa John's on Monday said it has received a $200 million strategic investment from the hedge fund Starboard Value and appointed Starboard CEO Jeffrey Smith as its chairman.
  • The pizza chain appointed three new directors, including Smith, to its board.
  • Around half of the proceeds from the deal will be used to repay debt, with the rest going towards investing in the business, Papa John's said.
  • Watch Pizza chain trade live.

Papa John's was rallying, up 5.17% to $40.50 a share early Monday, after announcing a $200 million strategic investment from the hedge fund Starboard Value and appointing Starboard CEO Jeffrey Smith as its chairman.

Starboard agreed to make the investment through the purchase of new convertible preferred stock, and the deal includes the option of an additional $50 million investment through March 29, 2019, according to a statement.

Smith, along with Anthony Sanfilippo, former CEO of Pinnacle Entertainment, have been appointed to be the two new independent directors of the pizza chain. Papa John's CEO Steve Ritchie is also joining the board, the statement said. 

Around half of the proceeds from the deal will be used to repay debt, with the rest going towards investing in the business, Papa John's said. 

RELATED: Take a look at Papa John's embattled founder: 

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Papa John's controversial founder John Schnatter
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Papa John's controversial founder John Schnatter
John Schnatter, founder and chief executive of Papa John's Pizza, arrives at the 2011 American Music Awards in Los Angeles November 20, 2011. REUTERS/Danny Moloshok (UNITED STATES - Tags: ENTERTAINMENT BUSINESS FOOD) (AMA-ARRIVALS)
John Schnatter (R), founder and chief executive of Papa John's Pizza, arrives at the 2011 American Music Awards in Los Angeles November 20, 2011. REUTERS/Danny Moloshok (UNITED STATES - Tags: ENTERTAINMENT BUSINESS FOOD) (AMA-ARRIVALS)
MIAMI, FL - JULY 11: A Papa John's restaurant is seen on July 11, 2018 in Miami, Florida. The founder of Papa John's pizza, John Schnatter, apologized Wednesday for using the N-word on a conference call in May. (Photo by Joe Raedle/Getty Images)
CLEVELAND, OH - OCTOBER 12, 2014: 'Papa' John Schnatter, founder and CEO of 'Papa John's Pizza' takes part in a radio show prior to a game between the Pittsburgh Steelers and Cleveland Browns on October 12, 2014 at FirstEnergy Stadium in Cleveland, Ohio. Cleveland won 31-10. (Photo by Nick Cammett/Diamond Images/Getty Images)
INDIANAPOLIS, IN - MAY 24: Papa John's founder and CEO John Schnatter attends the Indy 500 on May 23, 2015 in Indianapolis, Indiana. (Photo by Michael Hickey/Getty Images)
LOS ANGELES, CA - APRIL 04: John Schnatter and Halston Sage attend a basketball game between the Dallas Mavericks and the Los Angeles Lakers at Staples Center on April 4, 2014 in Los Angeles, California. (Photo by Noel Vasquez/GC Images)
CLEVELAND, OH - OCTOBER 12, 2014: 'Papa' John Schnatter, founder and CEO of 'Papa John's Pizza' takes part in a radio show prior to a game between the Pittsburgh Steelers and Cleveland Browns on October 12, 2014 at FirstEnergy Stadium in Cleveland, Ohio. Cleveland won 31-10. (Photo by Nick Cammett/Diamond Images/Getty Images)
LAS VEGAS, NV - APRIL 07: John Schnatter, Founder and Chairman of the Board for Papa John's Pizza, gives a thumbs up before a charity exhibition race against Antron Brown (not pictured) during the the 19th Annual DENSO Spark Plugs NHRA Four-Wide Nationals Saturday, April 7, 2018, in Las Vegas, Nevada. (Photo by: Marc Sanchez/Icon Sportswire via Getty Images)
NEW YORK, NY - JANUARY 31: John H. Schnatter, Founder, Chairman & CEO of Papa John's International, Inc. rings the NASDAQ Opening Bell at NASDAQ MarketSite on January 31, 2014 in New York City. (Photo by Rob Kim/Getty Images)
NEW YORK, NY - FEBRUARY 01: Dallas Cowboys owner Jerry Jones (L) and Papa John's Pizza founder John Schnatter attend the DirecTV Super Saturday Night at Pier 40 on February 1, 2014 in New York City. (Photo by Charles Norfleet/FilmMagic)
Spider Man and Papa John Founder John Schnatter at the Spider-Man and Papa John's Honor 'Hometown Super-Heroes' October 29, 2007 in Times Square in New York City. (Photo by Mark Von Holden/WireImage)
LOS ANGELES, CA - NOVEMBER 20: Founder of Papa John's Pizza John Schnatter attends the Official After Party for the 2011 American Music Awards held at the Conga Room at L.A. LIVE on November 20, 2011 in Los Angeles, California. (Photo by John Shearer/AMA2011/Getty Images for AMA)
LOS ANGELES, CA - NOVEMBER 20: 'Papa John's' Pizza Founder John Schnatter arrives at the 2011 American Music Awards held at Nokia Theatre L.A. LIVE on November 20, 2011 in Los Angeles, California. (Photo by Frazer Harrison/AMA2011/Getty Images for AMA)
NEW YORK - OCTOBER 29: Founder of Papa John's John Schnatter speaks onstage at the Spider-Man and Papa John's Pizza's announcement of 'Hometown Super-Heroes' in Times Square October 29, 2007 in New York City. (Photo by Bryan Bedder/Getty Images)
LOUISVILLE, KY - MAY 06: Paps John's CEO John Schnatter attends the 132nd Kentucky Derby at Churchill Downs on May 6, 2006 in Louisville, Kentucky. (Photo by Paul Hawthorne/Getty Images)
John Schnatter, founder & Pres. of a chain of Papa John's pizza restaurants, w. employees at one of his 1,049 outlets, making a surprise quality check on a row of pizzas layed out on counter at restaurant. (Photo by Taro Yamasaki/The LIFE Images Collection/Getty Images)
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“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," said Olivia Kirtley, a member of the Special Committee and most recently chairman of the Papa John's board.

"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."

The pizza chain also announced preliminary financial results for the three months and full year ended December 30, 2018. Its system-wide North America comparable sales decreased 10.5% and its international comparable sales were flat for the period December 31, 2018, to January 31, 2019.

Meanwhile, its 2018 adjusted diluted earnings per share are expected to be near the low-end of its previously provided range of $1.30 to $1.60, impacted by a $51 million special charge following its founder John Schnatter resigning as chairman in July after he used a racial slur on a media training conference call. Analysts were expecting $1.47 earnings per share.

Papa Johns was down 30% in the past 12 months. 

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