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Starboard CEO Jeffrey Smith Appointed As Chairman Of Papa John's

Papa John's International Inc. (PZZA) said that it reached a securities purchase agreement with Starboard Value LP pursuant to which Starboard is making a $200 million strategic investment in the company with the option to make an additional $50 million investment through March 29, 2019.

In connection with the investment, the Papa John's Board of Directors is expanding to include two new independent directors, including Jeffrey Smith, Chief Executive Officer of Starboard, who has been appointed Chairman of the Papa John's Board, and Anthony Sanfilippo, former Chairman and Chief Executive Officer of Pinnacle Entertainment, Inc.

The company said it plans to use approximately half of the proceeds of the investment to repay debt, with the remaining proceeds providing financial flexibility that enables Papa John's to invest capital to further advance its five strategic priorities of People, Brand, Value/Product, Technology and Unit Economics.

The company will take a disciplined approach to capital allocation, ensuring that investments in these five areas are directed to its highest return initiatives, with clear parameters and analytics in place to measure and track performance and execution.

Under the terms of the securities purchase agreement, Starboard is purchasing $200 million of a newly designated Series B convertible preferred stock of Papa John's. Through March 29, 2019, Starboard will also have the option, subject to certain limitations, to purchase up to an additional $50 million of Series B convertible preferred stock under the same terms and conditions as the initial investment. Subject to certain limitations, Papa John's has the right to offer franchisees who satisfy the accredited investor requirements under the federal securities laws (subject to verification) an opportunity to purchase a total of $10 million of the Series B convertible preferred stock on the same terms as Starboard.

Papa John's also announced preliminary, unaudited selected financial results for the three months and full year ended December 30, 2018 and comparable sales for the period December 31, 2018 to January 31, 2019.

System-wide North America comparable sales decreased (8.1%) for the fourth quarter. For the full year, system-wide North America comparable sales decreased (7.3%), compared to the Company's previous guidance of negative (6.5%) to negative (8.5%).

2018 adjusted earnings per share, excluding the impact of restaurant divestitures and the special charges, are expected to be near the low-end of the Company's previously provided range of $1.30 to $1.60. The company now expects these special charges to be approximately $51 million, which is at the low-end of its previously provided range of $50 million to $60 million.

Papa John's said it will discuss further details regarding its fourth quarter and fiscal 2018 performance as well as its outlook for 2019 when it reports results on February 26, 2019.

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