Papa John's Takeover Rumors Swirl, But Doubts Are Creeping In

Papa John's International Inc. (NASDAQ:PZZA) shares are trading lower on Thursday.

On Wednesday, several media reports emerged that the company may be nearing a significant ownership change, as private equity giant Apollo Global Management, Inc. (NYSE:APO) and Qatari-backed investment firm Irth Capital have reportedly joined forces to pursue a buyout of the pizza chain, valuing it at approximately $2 billion.

Semafor reports that the offer is in the low $60s per share, notably higher than the current stock price of around $48, citing sources familiar with the situation.

While Apollo has a history of large-scale acquisitions, Irth Capital is a much smaller player with less than $200 million in assets as of late 2023. Irth, backed by Sheikh Mohamed al Thani of Qatar's royal family, holds a 5% stake in Papa John's.

Following the reports, PZZA stock surged over 7% on Wednesday.

Also Read: Pizza Power Play: Analyst Says Domino’s Gains Share, Papa Johns Holds Steady, Pizza Hut Loses Ground

Despite its size, Irth has experience with consumer-focused turnarounds, having been involved in the acquisitions of Casper and Bojangles.

Irth reportedly still needs to secure financing for its portion of the proposed deal, Semafor adds.

If that doesn't materialize, Apollo could move forward on its own.

As of now, neither Apollo nor Papa John's have issued public statements, and Irth has not responded to requests for comment.

If a formal sales process is launched, more potential suitors could emerge. Inspire Brands, known for its acquisition of Dunkin' Donuts in 2020, may explore the opportunity, Semafor further adds.

Another possibility is Roark Capital, which recently completed a deal for Dave's Hot Chicken and owns Subway.

Papa John's franchising model, which licenses branding and ingredients to independent operators, aligns with their typical investment strategies, the report further states.

In 2018 and 2019, Papa John's faced a public controversy involving its founder, John Schnatter, who used a racial slur during a conference call, Reuters reports. The incident led to legal disputes and, ultimately, a deal with activist investor Starboard Value, whose CEO took over as chairman of the board in 2019 following Schnatter's departure.

Although Starboard helped stabilize Papa John's, industry observers believe more changes are needed—fueling speculation of a potential take-private move to enable deeper restructuring out of public view, Reuters adds.

Under current CEO Todd Penegor, Papa John's has made notable performance improvements, though its stock continues to trade at a slight discount compared to peers like Yum! Brands Inc. (NYSE:YUM) and Domino's Pizza Inc. (NYSE:DPZ).

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