Papa John's Stock Up On Potential Buyout By Restaurant Brands
Zacks Investment Research | Jan 23, 2019 11:41PM ET
Shares of Papa John's International, Inc. (NASDAQ:PZZA) has surged 7.7% at close on Jan 23, following a few reports about the company mulling over selling out to Restaurant Brands International (NYSE:QSR) . Per a Deal reporter, Restaurant Brands, the parent company of Burger King, Popeye's Louisiana Kitchen and Tim Hortons, has the probability of teaming up with the former CEO John Schnatter and investment capital firm 3G Capital to make the purchase.
In November 2018, Trian Fund Management LP — a private equity fund — discarded an offer to buy Papa John’s. Rumors have been doing the rounds that Papa John’s has been receiving takeover proposals from companies and private equity firms.
Why is Papa John’s Desperate for a Sellout?
Apart from witnessing a consistent decline in revenue trends, Papa John’s has been receiving negative publicity after its ex-CEO, John Schnatter has been publicly denounced for making a racist comment. Since then, Papa John’s has been relentlessly trying to distance itself from Schnatter, and craft various ways to regain its brand image and sales trend.
To this end, the company was exploring various opportunities to sell out completely. Papa John’s is also said to have sought assistance from Bank of America Corporation (NYSE:BAC) in Auguston potential buyout interests.
Papa John’s also undertook an assistance program for its U.S. and Canada franchisees. Under the assistance program, it planned on reducing royalties, food-service pricing and online fees throughout the current year. Further, the company has been arranging funds for its franchises to implement marketing and reimaging initiatives.
Dismal comps performance over the past couple of quarters has been the most major concern for Papa John’s. In the third quarter, comps at domestic company-owned restaurants declined 13.2% versus 1.7% comps growth in the year-ago period. Comps at franchised restaurants in North America fell 8.6% against comps growth of 0.7% in the prior-year quarter. Comps at system-wide North American franchised restaurants decreased 9.8% in contrast to 1% comps growth in the year-earlier quarter. Comps at system-wide international restaurants were down 3.3% as opposed to comps growth of 5.3% in the prior-year quarter.
Apart from the bleak top-line performance, the company’s earnings have also declined in the past few quarters due to weak operating results. Stiff competition from pizza chains like Domino’s (NYSE:DPZ) is also a major concern.
Notably, a look at Papa John’s price trend revealed that the stock has had an unimpressive run on the bourses in the past year. Shares of the Zacks Rank #4 (Sell) have lost 32.1% against the Original post
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.