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Papa John's to Repurchase and Convert its Convertible Preferred Stock Owned by Starboard Value

05/12/2021 05:43

09:28 AM EDT, 05/12/2021 (MT Newswires) -- Papa John's International (PZZA) said Wednesday it agreed to repurchase and convert all of the shares of its Series B convertible preferred stock owned by Starboard, which is expected to happen on May 13.

Following this deal, Starboard will own around 9.5% of the company's outstanding shares of common stock, and Starboard chief executive Jeff Smith will remain chair of Papa John's Board.

As a result of the deal, the company's fully diluted common stock share count will increase by 3.5 million shares. The transaction will be financed with cash and with the company's existing revolving credit facility.

Starboard's 3.6% preferential dividend on the preferred shares, at $9.0 million in fiscal 2020, will be eliminated, which will increase the company's earnings per diluted share by $0.09 or 11%, on a pro forma basis in Q1.

In Q2 of fiscal 2021, the company will record a reduction to net income attributable to common shareholders of around $110 million as a one-time charge to equity, which would result in a reduction of roughly $3.00 per diluted share in Q2 of fiscal 2021.

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