Is a Papa John’s takeover on the menu?


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Papa John's is losing the pizza wars. Big time.

Papa John’s is transferring on with out Papa John.

Does that imply takeover of the struggling pizza chain might quickly be on the menu?

Shares of Papa John’s (PZZA) soared 11% final week after the corporate introduced that founder John Schnatter was stepping down as chairman. He resigned after it was reported that he used a derogatory racial slur in a convention name with a advertising and marketing agency, and traders appeared to cheer his exit.

His departure sparked conversations on social media and elsewhere about Papa John’s attractiveness as an acquisition goal.

Papa John’s was not instantly out there for remark about merger hypothesis, however the firm may very well be amenable to a sale given its issues.

However who would possibly purchase the corporate if it does wind up for grabs?

Most rumors heart on Restaurant Manufacturers (QSR), the Canadian firm that owns Burger King, Tim Hortons and likewise just lately acquired the fried hen chain Popeyes Louisiana Kitchen.

Restaurant Manufacturers stated it could not touch upon takeover rumors.

Nonetheless, analysts at each Credit score Suisse and Oppenheimer have talked about Papa John’s in analysis stories throughout the previous yr as being a doubtlessly good match for the corporate.

Papa John’s is at present valued at $1.6 billion. Restaurant Manufacturers paid $1.eight billion for Popeyes. So a purchase order of Papa John’s looks as if it could be pretty simple to digest for Restaurant Manufacturers.

Associated: How do you rebrand Papa John’s when the issue is Papa John’s?

Shopping for Papa John’s would additionally assist Restaurant Manufacturers turn into much more like Yum! Manufacturers (YUM), the restaurant conglomerate that owns KFC, Taco Bell and Papa John’s rival Pizza Hut.

Restaurant Manufacturers could be probably the most logical candidate but it surely’s actually not the one one.

European meals big JAB purchased quick informal sandwich chain Panera in 2017 for $7.5 billion. The corporate, which additionally owns Krispy Kreme, acquired each Au Bon Ache and Pret A Manger earlier this yr and will make sense as a purchaser of Papa John’s.

Encourage Manufacturers, the non-public equity-backed agency that owns Arby’s and purchased Buffalo Wild Wings final yr for practically $three billion, may very well be one other potential Papa John’s suitor.

There’s additionally Darden Eating places (DRI). The Olive Backyard proprietor has proven a willingness to do offers. It bought Cheddar’s Scratch Kitchen in 2017 for $780 million.

To make certain, Papa John’s might very nicely stay impartial. However the choice might largely rely on what Schnatter needs to do.

Though he is being phased out as the corporate spokesperson and is now not chairman, Schnatter stays on the board and is the corporate’s largest shareholder — with an almost 30% stake.

Associated: Papa John’s was already shedding the pizza wars

However Papa John’s faces powerful competitors. Rival Pizza Hut took over because the NFL’s pizza sponsor after Papa John’s ended its cope with the league final yr. That separation adopted feedback from Schnatter that blamed soccer gamers’ Nationwide Anthem protests for weak gross sales.

Domino’s (DPZ) can also be hurting Papa John’s. It has embraced cellular know-how that enables individuals to tweet emojis and use Fb’s Messenger to order pies. Domino’s has posted sturdy positive factors in gross sales these days and the inventory is close to a report excessive.

Papa John’s inventory, however, is down practically 10% this yr and it has plunged greater than 33% up to now 12 months.

Gross sales fell within the first quarter of 2018 and analysts are predicting that each income and income will proceed to drop for the rest of the yr.

So except Papa John’s turns issues round quickly, Schnatter and the remainder of the board might resolve a sale of the corporate would possibly make sense.

CNNMoney (New York) First revealed July 17, 2018: 1:04 PM ET

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