Papa John’s International Inc founder John Schnatter welcomes hedge fund Starboard Value LP’s investment in the pizza restaurant chain, his lawyer said, even as he filed an updated lawsuit on Monday against the company.
Papa John’s this month unveiled Starboard’s investment of up to $250 million and named the fund’s chief executive, Jeff Smith, as its chairman.
Schnatter, who according to Refinitiv data owns about 30 per cent of the company he founded in his father’s bar, served as chairman until last summer. He stepped down after reports he had used a racial slur on a media training conference call, a decision he said he regrets. He had stepped down as chief executive in December 2017.
Schnatter, who is still a member of Papa John’s board of directors, has been trying to gain more control of the chain. With the Starboard investment, the number of directors jumped to nine from six, diluting his influence.
“Mr. Schnatter welcomes the comments that have come from Mr. Smith and the company in the past few days,” Schnatter’s attorney Garland Kelley said in a statement. “Today’s amended lawsuit reflects support for Mr. Smith and his plans to invigorate the company for the benefit of all shareholders.”
In his amended lawsuit filed under seal in the Delaware Court of Chancery, Schnatter aims to undo a new provision of a voting agreement between Papa John’s and Starboard that requires the hedge fund vote its company shares in favour of Papa John’s preferred directors.
“Such a provision serves only one purpose, to further entrench the prior board, one that has repeatedly proven itself willing to place its own self-interest above that of shareholders,” Schnatter said in a statement.
Schnatter also continues to challenge the poison pill Papa John’s adopted last year that he says prevents him from having discussions about the restaurant chain with other shareholders. The lawsuit was first filed in August.
When Papa John’s accepted Starboard’s offer, it snubbed a rival one from Schnatter.
Schnatter had said in a regulatory filing that he was evaluating his legal options after his offer was rejected.
Last month he claimed a victory when Chancellor Andre Bouchard of Delaware Court of Chancery ordered the Papa John’s board to give Schnatter some internal documents and communications, including text messages on personal devices, related to his firing.