By Danny Klein
Reports of a potential Papa Johns takeover surfaced in mid-February following news an investment fund—Irth Capital Management—had spoken with advisers about potentially preparing a private bid for the pizza giant. The story initially popped Papa Johns’ stock. Wall Street reacted similarly Wednesday on more alleged activity, this time from Apollo Global Management and Irth together.
According to two people familiar with the matter, as reported by Reuters, the deal would take Papa Johns private. The U.S.’ fourth-largest pizza chain (behind Domino’s, Pizza Hut, and Little Caesars) has been public since June 8, 1993. The investment firms’ joint bid would value Papa Johns at above $60 per share, per the report. Shares closed 7.5 percent higher Wednesday, lifting Papa Johns to a market value of $1.7 billion. It was trading for $51.08 mid-day Thursday, down about 1 percent off Wednesday’s jump, when it got as high as $53.84.
The brand’s stock has sloped upward since mid-April (it was $30.45 on the 15th).
Related: Papa Johns Makes Shaq-a-Roni Permanent Menu Item
Irth, founded by Matthew Bradshaw and Sheikh Mohamed “Moe” al Thani, a member of the Qatari royal family, disclosed a 4.99 percent stake in Papa Johns last year—just beneath the threshold needed to disclose plans. That accounted to 1.6 million shares worth about $70 million.
Bradshaw has experience in this arena. He cofounded Durational Capital before Irth. Durational is the firm that pulled Bojangles private in 2018 alongside The Jordan Company, L.P. for $593.7 million. The all-cash acquisition closed on January 28, 2019, after shareholders approved it two weeks earlier. Durational also brought mattress company Casper private in 2021.
Apollo is also no stranger to the business. The company acquired QDOBA from Jack in the Box in 2018 and recently brought in Wagamama owner Restaurant Group in 2023. It also previously owned CKE Restaurants and Chuck E. Cheese.
In an investor note Thursday, BTIG analyst Peter Saleh said he wasn’t convinced a transaction was imminent. But he did feel the implied valuation was in line with historical deals.
Since 2010, he said, the average take out transaction multiple has been about 10.9x, with franchised models garnering slightly more.
The reported deal would imply a valuation in the range of roughly 13.5x trailing 12-month EBITDA and a premium to the historical average transaction multiple of 10.9x. “While we think this is a fair multiple,” Saleh said, “we are unsure how a buyer would add value, or materially change the strategy to take market share. Given the current leverage at [about] 3.2x debt/adjusted EBITDA, we don’t believe financial engineering is an option.”
Papa Johns’ trailing EBITDA is about $202 million. So applying the average multiple of 10.9x turns a valuation of about $45 per share. At $160, the implied valuation is closer to 13.5x trailing EBITDA—2.5x above the average multiple but in line with the average of the deals listed above.
Back to the timing, Saleh believes the brand’s recent refranchising activity suggests a deal could take some time to materialize. Earlier in the year, Papa John announced it refranchised 15 stores in Wisconsin in September. It also noted it was in discussions to do so in other, larger markets. Saleh said this suggests Papa Johns is not actively engaged with a potential acquirer, “as refranchising is a significant structural change that reduces EBITDA.”
Papa Johns in Q1 revealed it was looking at refranchising select units to “future-focused” operators as they aim to scale across various markets. The company added it was “aggressively” evaluating opportunities to optimize the value proposition of its integrated supply chain as well to better serve franchisees.
“Lastly,” Saleh said, “we remain concerned with the direction of operating and free cash flow. In 2024, free cash flow and dividends was negative [$27 million], with the proceeds from the commissary sale-leaseback bridging the gap.”
Saleh estimated $69 million of free cash flow for Papa Johns this year, which would allow the company to satisfy its dividend requirement but not leave much more for debt reduction or unfavorable working capital movement.
All said, the situation remains fluid. Irth has a history in taking small stakes in public companies with an eye toward full takeovers. It manages roughly $200 million, per regulatory filings.
And Papa Johns has been here before. It was rumored as a takeover target in 2018 as well, with reports surfacing Nelson Peltz’s Trian Partners debated a move. Activist Starboard Value made a $200 million investment in the brand in 2019. Papa Johns agreed to repurchase Starboard’s shares in March 2023.
Papa Johns’ North America same-store sales declined 3 percent in Q1, year-over-year (down 5 percent on a two-year stack) as company units fell 5 percent (8 percent two-year) and franchises 2 percent (4 percent two-year).
Papa Johns in April announced a partnership with Google Cloud that included creating an internal innovation team called “PJX.” The goal was to use Google Cloud’s AI, data analytics, and machine learning to address a cadre of opportunities, delivery included.
The five-point approach centers on core product development and innovation; amplify marketing message; invest behind tech; differentiate customer experience; and partner with and evolve the franchisee base.
Papa Johns’ same-store sales performance:
- Q1 2025: –3 percent
- Q4 2024: –4 percent
- Q3 2024: –6 percent
- Q2 2024: –4 percent
- Q1 2024: –2 percent
In Q1, Papa Johns made the call to leverage its barbell and position premium offerings next to value deals to bolster a sliding proposition that’s been a day one focus for Penegor. That meant placing strong messaging behind the Epic Stuffed Crust priced at $13.99 and support behind its $6.99 Papa Pairings.
The number of overall pizzas ordered in the quarter increased 4 percent versus last year and the brand has since witnessed sequential improvement in orders with multiple pizzas.
The 3 percent comp decline marked the second consecutive period of sequential improvement as well, up 290 basis points since Papa Johns implemented a value strategy following Q2 2024.
Papa Johns also added a million users in Q1 to its loyalty program to get to 37 million. The company refined its CRM and one-to-one communication and personalization capabilities. Notably, though, the company in November lowered the threshold for earning “Papa Dough.” This decreased Papa Johns’ overall order ticket by about 130 basis points. Q1 ticket comps were down 2 percent versus the prior year, with more than 50 percent owing to the threshold decision.
Papa Johns invested about $7 million in incremental marketing in Q1 to test media mix, customer communications and messaging tactics, while reinforcing a core message, and plans to deploy an additional $25 million in marketing this year, above its 2024 spend.
Papa Johns ended the period with 6,019 global units. In North America, it opened 18 new restaurants and closed 16, bringing the count to 3,516. It projects to open between 85 and 115 gross new stores in North America this year, and roughly 70 percent of remaining openings are currently in the construction, design, or later stages. Currently, the brand has 539 company-run North America restaurants.
Danny Klein is vice president of editorial at WTWH Media, where he primarily writes for QSR and FSR magazines, sister publications to PMQ. This story was originally published on the QSR magazine website.
