Activist investor Legion, California pension fund build stake in Papa John’s

Activist investor Legion Partners has built up a stake in Papa John’s International Inc., the pizza chain that has been embroiled in a dispute with its founder for the last several months.

Legion owns 5.46% of shares in the company through various affiliates, while the California State Teachers’ Retirement System owns about 34,000 shares. The two investors said in a joint securities filing Monday that the company’s share price “does not reflect the Issuer’s intrinsic value” and that “multiple potential paths to significantly higher valuations exist for [Papa John’s] through strategic partnerships or improving operations as a stand-alone company.”

Legion and CalSTRS, as the pension fund is also called, said in the filing that the pizza company could boost profits by cutting costs and relying more heavily on franchises.

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Louisville, Ky.–based Papa John’s PZZA, -3.92%  has struggled in recent months. In July, founder and longtime chief executive John Schnatter stepped down as chair of the company’s board, after it was reported that he used a racial slur and other inflammatory language during a call with marketers in May. On Monday, shares of Papa John’s fell 3.9% to $49.27. So far this year, the stock has dropped 12%. But company’s share price ticked up 2.5% in aftermarket trading.

An expanded version of this report appears on WSJ.com.

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