Papa John's jumps most in month after take-private proposal at 25% premium

Shares of struggling pizza chain Papa John's jumped more than 7% yesterday, June 11, ending the day at their highest mark since November. This came after sources told Reuters and Semafor that two investment funds want to buy the company and take it private, offering to pay a quarter more than where the stock traded before yesterday's rally.

Papa John's rose 7.45% on the Nasdaq yesterday to $51.79 per share, the highest closing price since November 11. The one-day gain was the best in a month, noted Bloomberg. Before the opening bell this morning, June 12, shares have continued to rise, adding around 0.4% as of this writing. 

Apollo Global Management and Irth Capital Management, the latter backed by members of Qatar's royal family, have made a proposal that would take the pizza chain private, reports Reuters, citing two people «familiar with the matter.» However, Irth still needs to sort out the financing and it is possible Apollo could do the deal alone, said Semafor's sources.

Papa John's, the world's third-largest pizza delivery company with more than 6,000 restaurants in 50 countries, was valued at just over $60 per share in the proposal, reports Reuters. This is some 24.5% more than the close on Tuesday, the day before the potential deal was reported. Even after yesterday's rally, the offer implies a premium of about 15.8%. 

Papa John's declined to comment to Reuters. Meanwhile, Apollo and Irth did not respond to Reuters' requests for comment. 

Papa John's has struggled for years as consumers cut back on restaurant spending due to inflation, Barron's noted back in February. That's when Irth's interest in the pizza chain was first reported, causing the stock to soar 18% in a single day.

The company is undergoing a transformation under Todd Penegor, who has been CEO for less than a year, reports Bloomberg. For the first quarter, Papa John's reported a revenue increase of just 1% to $1.22 billion. This was supported by growth in global markets, while in North America was still down. 

In 2019, activist investor Starboard Value joined after a scandal around founder John Schnatter. It helped turn around the company, but some industry players have speculated that the company could be a take-private target to allow for more improvements to be made away from the glare of public-market investors, Reuters writes.

Papa John's stock has added 26% year to date and about 9% in the last 12 months.

Nine Wall Street analysts rate Papa John's as a «hold,» while eight have it as a «buy,» MarketWatch data shows. The average target price of $46.55 is below current quotes.