Luby’s Inc. and a New York hedge fund officially joined battle this past week in a proxy fight over board seats expected early next year.
The Houston-based company, parent to the Luby’s cafeteria and Fuddruckers concepts, and New York-based Bandera Partners LLC, which owns about 9.8 percent of the company’s shares, filed preliminary documents with the Securities and Exchange Commission over the election of board seats.
Shareholders will elect board members at a still-unscheduled annual meeting early next year.
Bandera nominated four candidates, including the fund’s managing partner Jeff Gramm and his father, former U.S. Sen. Phil Gramm (R-Texas). The other two nominees are Stacy Hock, chairwoman of Texans for Education Opportunity, and Savneet Singh, managing partner of New York-based Tera Holdings.
“While Bandera sometimes engages with management teams to effect positive change, we rarely push for board changes,” Bandera said in SEC filings. “In the case of Luby’s, however, we feel board changes are absolutely necessary to unlock the value we believe is trapped at the company.”
Luby’s, in its preliminary documents, said, “The board of directors does not endorse any of Bandera’s nominees.”
The company urged shareholders to vote for its nine directors, who serve for a year each, and also to approve an amendment to its certificate of incorporation that would “eliminate the supermajority voting requirement for shareholders to remove directors.”
Luby’s CEO Chris Pappas and board member Harris Pappas together own 36.8 percent of the company's outstanding shares.
Bandera Partners has said the company has suffered “bloated corporate expenses” and was selling real estate that harmed shareholder equity.
“What’s happening at Luby’s is simply not working,” Jeff Gramm said in a letter to the board. “The Fuddruckers and Luby’s restaurant concepts do not generate a sufficient return on capital to justify the investments management is making, under your direction and supervision, into the business.”
For the fourth quarter ended Aug. 29, Luby’s narrowed its loss to $1.9 million, or six 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.
The total number of Luby’s company-owned restaurants fell from 167 at the end of last fiscal year to 146 as of Aug. 29. In addition to its owned restaurants, Luby’s franchises 105 Fuddruckers locations across the United States (including Puerto Rico), Canada, Mexico, Panama and Colombia. That number was down from 109 franchised locations on June 6, at the end of third quarter.
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