Papa John's adopted a so-called poison pill defense to protect itself in the event its founder and former chairman, John H. Schnatter, tries to gain control of the pizza chain through open-market accumulation.
The company rolled out the poison pill strategy, which is intended to prevent any shareholder from taking over a controlling interest in Papa John's, in a July 22 announcement. The company's largest shareholder is Mr. Schnatter, who owns 30 percent of Papa John's stock.
Mr. Schnatter resigned as chairman of the board July 11 after he apologized for using a racial epithet earlier this year. The resignation came hours after Mr. Schnatter apologized for using the racial slur in a comment about black people during a May conference call, according to The New York Times. He later said his resignation as chairman "was a mistake," according to a letter to the company's board reviewed by The Wall Street Journal.
The poison pill will take effect if Mr. Schnatter and his affiliates increase their combined stock to 31 percent. It will also take effect if anyone buys 15 percent of Papa John's common stock without board approval.
Papa John's stock fell 9.75 percent July 23, according to The New York Times.
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