Papa John's Gets New Board Chair, Probably Pissing Off Old Board Chair

Struggling pizza chain Papa John's has finally found a new investor: Louisville's Courier-Journal reports that hedge fund Starboard Value LP "has agreed to make a $200 million investment in the pizza chain and will place two of the fund's investors on its board." Jeffrey E. Smith, Starboard's CEO, will head Papa John's board.

The company is hopeful this influx of cash and new leadership can aid Papa John's, which has posted a loss of more than 8 percent for the fourth quarter and 7 percent for the entire previous year. PJ's CEO Steve Ritchie was also named to the board.

You'll never guess who wasn't on board with this new setup: Company founder and former CEO and board chair John Schnatter, who immediately tried to match Starboard's investment with his own $250 million offer, as well as an additional $10 million for struggling franchisees. Unsurprisingly, the board, which has lately been in various legal squabbles with Schnatter, declined the offer. Says CJ, "Schnatter's team said his offer was withdrawn, but he held out the possibility that he'd take legal action as a result of the company's move." Schnatter also remains on the nine-person board.

This new development had an immediate positive effect on Papa John's stock. CNBC reports: "Shares of Papa John's jumped 6 percent in the premarket Monday" after Starboard's $200 million financial commitment was announced. Bloomberg points out that Starboard has "previously mounted activist campaigns at Yahoo Inc., Symantec Corp. and other companies." The hedge fund also replaced 12 directors on the board of Olive Garden owner Darden Restaurants Inc. in 2014 in a major turnaround effort, with Smith taking over as chair there as well. As Bloomberg describes: "That proxy fight included a nearly 300-page Power Point presentation that called for several specific changes at the Italian-dining chain, including adding salt to the water when cooking pasta," an idea eventually discarded because the salt could void the warranties on Olive Garden's pots.