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Schnatter gives Papa John's board to EOD Tuesday to change 'poison pill' provision

October 22, 2018

Papa John's beleaguered founder John Schnatter is making another play to gain control of the company following his many alleged missteps of the last 12 months.

This time it's via a letter to the company's board demanding they change the "poison pill" provision in the company's Rights Plan, according to digital financial news site, The Fly. Poison pill provisions are typically enacted to prevent take-over attempts of a company. Schnatter owns 30.9 percent of Papa John's outstanding common stock.  

"Specifically, I request that you promptly amend the Poison Pill to remove or otherwise render inapplicable the 'Acting in Concert' provisions of the Poison Pill," The Fly reported, quoting the letter. "As you know, no Delaware court ever has found that this type of 'wolf pack' provision in a poison pill is consistent with Delaware law. In fact, this provision goes far beyond Delaware law by unreasonably curtailing the rights and legitimate interests of shareholders."

Schnatter made that last claim because he said the "wolf pack" element prevents shareholders from having any real discussions about the company as that would threaten dilution of their ownership interest. He also wrote the provision needs to be deleted promptly because of investment interest in the pizza chain. 

"Several third parties have expressed an interest in speaking with me," The Fly reported, citing the letter. "The 'Acting in Concert' provision, however, precludes me from discussing the Company, my investment in the Company or the activities or plans of potential investors or shareholders with them or anyone else with an interest in the Company. I believe that preventing me from discussing such matters will lead to significant loss of value for all shareholders and is in plain contravention of your duties under Delaware law."

The letter also criticized company leadership and structure of the brand and demanded board response by the end of business on Oct. 23, noting he would take action if there were no response "to ensure the Company permits the shareholders to exercise their rights."