admin October 10, 2018


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Papa John’s is a rare acquisition opportunity, according to one analyst.

Embattled pizza chain Papa John’s International Inc. will probably be bought out in the next year, forecasts Kalinowski Equity Research President Mark Kalinowski.

The Wall Street Journal reported Monday that Trian Fund Management LP is assessing a possible takeover bid, sending shares surging in after-hours trading. Shares closed Tuesday up nearly 9%.

Last week, activist investor Legion Partners and the California State Teachers’ Retirement System built up a stake in Papa John’s.

In August there were reports that the company had hired advisers to evaluate the options, but there was no discussion at the time about strategic alternatives or a sale.

“Odds favor that the company is sold in the next 12 months or so,” Kalinowski told MarketWatch. “There’s a lot of incentive to make this happen.”

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Papa John’s














PZZA, +8.89%












  is the third-largest pizza delivery chain in the world after Domino’s Pizza Inc.














DPZ, +1.41%












  and Pizza Hut, which is a Yum Brands Inc.














YUM, +0.60%












  chain.

“The pizza business is a global business,” said Kalinowski. “It’s bread, cheese, and whatever you want to put on the bread and cheese. It’s something that works for every culture on the globe. It’s not often that these sorts of opportunities come up. Opportunities come about because companies stumble badly. This is exactly what happened with Papa John’s.”

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Papa John’s is currently embroiled in an ongoing battle with the company’s founder, John Schnatter, who was ousted from the chief executive position following a series of controversies. Schnatter blamed NFL players for a drop in the company’s sales. (He later apologized.)

Schnatter resigned as CEO after reports that he used a racial slur on a conference call. (He later regretted the move.)

In late September, there were reports that Schnatter was seeking a private-equity partner to buy the company back.

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After reports of the racial slur incident, The Wall Street Journal said that merger talks with Wendy’s Co.














WEN, +0.98%












  ceased. Trian owns a 13% stake in Wendy’s.

Schnatter owns nearly 30% of Papa John’s shares.

“Is Papa John’s so big that it can’t be acquired?” Kalinowski asks. “No. Is it salvageable? Yes. Does it offer things that could work for the right buyer? Yes.”

Kalinowski rates Papa John’s shares buy with a $68 price target.

Papa John’s shares are down 21% for the past year while the S&P 500 index














SPX, -0.14%












  has rallied 13.2% for the period.



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