Luby’s Inc. issued a shareholder letter Thursday that questioned the credibility and commitment of an activist investor’s board nominees as the company moves toward a Jan. 25 proxy vote.
New York-based Bandera Partners LLC launched the proxy battle in November when it offered its own slate of candidates for the nine-member board at the Houston-based owner of Luby’s cafeterias and the Fuddruckers burger brand.
Bandera cited “bloated corporate expenses” and the company’s sale of real estate among reasons for the proxy fight.
The hedge fund owns more than 9 percent of Luby’s’ shares, while sitting board members hold about 38 percent.
“The interests of Luby’s directors Chris Pappas [Luby’s’ president and CEO], Harris Pappas, Frank Markantonis and Gasper Mir III are acutely aligned with all shareholders,” Luby’s sitting board said in its Thursday letter to shareholders. “Luby’s management and board have more ‘skin in the game’ than anyone, given their combined beneficial ownership of approximately 38 percent of the company.”
Luby’s told shareholders it “is already making substantial progress on its aggressive turnaround plan to generate consistent and sustainable same-store sales growth and improved store profitability — all with the goal of increasing shareholder value.”
The company also said Bandera’s four nominees to the board did not have the experience to oversee the turnaround.
Bandera has nominated Jeff Gramm, the investment group’s co-founder and portfolio manager, former Sen. Phil Gramm (R-Texas), technology entrepreneur Savneet Singh and business owner Stacy Hock.
“It is still entirely unclear what Bandera’s ‘plan’ is for Luby’s,” the letter said. “Considering that none of their nominees possess restaurant operating experience — and given that you can’t turn around a restaurant company on a spreadsheet — we believe, if elected, they would push for short-term actions that would do shareholders a grave disservice over the medium- and long-term.”
Luby’s cited Bandera’s record in a 2017 proxy fight at Dallas-based Fiesta Restaurant Group Inc., parent to the Taco Cabana and Pollo Tropical brands.
“Fiesta’s shareholders overwhelmingly voted to re-elect all three Fiesta directors …,” Luby’s noted, “instead of the nominees proposed by Bandera and its group.”
For the fourth quarter ended Aug. 29, Luby’s narrowed its loss to $1.9 million, or 6 cents a share, from $4.1 million, or 14 cents a share, in the same period a year ago. Sales were down 3.1 percent to $83.9 million from $86.6 million in the prior year quarter.
To stem losses, Luby’s announced an asset-sale program of $25 million in April and expanded it to $45 million in July, with the company selling 10 owned properties for $14.8 million in profit in the fiscal year.
Luby’s owns and operates 142 restaurants, including 82 Luby’s Cafeterias and 59 Fuddruckers. It also franchises 104 Fuddruckers in the United States and abroad. The company also operates Luby’s Culinary Contract Services, which provides foodservice management to 30 healthcare, higher education, sport stadium and corporate dining sites.
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