Papa John’s Announces Repurchase and Conversion of All Convertible Preferred Stock Owned by Starboard Value LP

Papa John’s International, Inc. (NASDAQ: PZZA) today announced that it has entered into an agreement with Starboard Value LP and certain of its affiliates (collectively, “Starboard”) relating to the repurchase and conversion of all of the shares of Papa John’s Series B Convertible Preferred Stock (the “Preferred Shares”) owned by Starboard. The repurchase and conversion is expected to close on May 13, 2021.

The Preferred Shares, which were acquired by Starboard in the first quarter of 2019 as part of a $250 million strategic investment in the Company, carried a preferential cumulative dividend payable in cash at a rate of 3.6% per annum, as well as pass-through common dividends, for a total yield of approximately 5.4%. As of the date of the agreement, the Preferred Shares represented approximately 13.2% of Papa John’s outstanding common stock on an as-converted basis, and were convertible at Starboard’s option at any time into shares of common stock based on a conversion price of $50.06.

Pursuant to the agreement, the Company will repurchase 31% of the outstanding Preferred Shares, representing approximately 1.6 million shares of common stock on an as-converted basis, and Starboard will convert its remaining Preferred Shares into approximately 3.5 million shares of the Company’s common stock. Both of these actions will be taken in return for a one-time payment of $183.9 million, with the payment based on a negotiated discount to the estimated fair value of the Preferred Shares owned by Starboard. Following the transaction, Starboard will beneficially own approximately 9.5% of the Company’s outstanding shares of common stock, and Starboard CEO Jeff Smith will remain Chair of Papa John’s Board.

President & CEO Rob Lynch said, “Since Starboard’s investment in early 2019, Papa John’s has returned to growth, reflecting the strength of our culture, innovation and operations. Starboard and Jeff’s support and leadership have been instrumental to this progress and I am thrilled to continue our partnership. Looking ahead, with the foundations of our business stronger than ever, we are now able to use our strong financial position to simplify and optimize our capital structure, supporting our long-term earnings growth and continued value creation for our shareholders.”