Starboard CEO to be Papa John’s chairman in $200-mn deal

Starboard Value will make its chief executive officer the chairman of Papa John’s International Inc. via a $200 million investment in the troubled pizza chain.

The activist fund’s CEO, Jeffrey Smith, will take over the board role after Papa John’s founder John Schnatter stepped down as chairman last year after report emerged that he used a racial slur. Shares of Papa John’s gained 11 per cent in premarket trading.

Papa John’s plans to use the proceeds to repay debt and invest in the business, it said in a statement. Starboard is making its investment through the purchase of new convertible preferred stock, and the deal includes the option of an additional $50 million investment.

Besides Smith, the board added another independent director — Anthony Sanfilippo, former chairman and CEO of Pinnacle Entertainment. Current Papa John’s CEO, Steve Ritchie also joins as a director. With the additions, the board now has nine directors.

The board voted to approve the Starboard plan Sunday night, and theWallStreetJournal reported that Schnatter voted against it. “Our agreement with Starboard concludes a comprehensive strategic review conducted over the past fivemonths to better position Papa John’s for growth, improve the firm’s financial performance and serve the best interests of our stakeholders,” Olivia Kirtley, a member of the special committee that initiated the review, said.