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Activist investor says Luby’s is ‘simply not working’

Bandera Partners filed a letter with the SEC, making its case for a handpicked slate of board nominees.
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The activist investor pushing a slate of candidates to the Luby’s Inc. board of directors submitted a strongly worded letter to the board this week, expressing dissatisfaction with how the struggling restaurant brand is being run.

New York City-based investment firm Bandera Partners LLC, led by Jefferson Gramm, said it intends to file a preliminary proxy statement and proxy card to solicit shareholder votes for its director nominees at Luby’s 2019 annual meeting.

“I have a fiduciary responsibility to the investors in my fund, and I’m writing today to tell you that what’s happening at Luby’s is simply not working,” Gramm wrote in the letter, which was filed with the Securities and Exchange Commission.

Luby’s Inc., which currently operates 84 Luby’s restaurants, 60 Fuddrucker’s restaurants and one Cheeseburger in Paradise unit, did not respond to a call or email from Restaurant Business seeking comment.

In the letter, Bandera, which owns an 8.9% share in Luby’s, outlines its dissatisfaction with how the company is being run, as well as the lack of communication it has received from Luby’s CEO Christopher Pappas.

“I tried to settle this matter amicably, and for the good of all shareholders, but you left me no choice but to nominate a slate of highly qualified directors with deep experience in finance, real estate and restaurant operations,” Gramm wrote. “You could have embraced them and offered to add at least some of them to the Board, instead of snubbing us, rejecting serious discussion, and forcing us to bring real choice directly to shareholders.”

Gramm declined to comment further on the letter when reached by RB.

Earlier this year, Luby’s management issued a “going concern warning,” expressing doubt about whether the company could generate enough cash to stay in business. Luby’s has closed 21 locations this year and laid off some of its corporate staff as it struggles to pay outstanding debt. It reported a loss of $33.6 million in fiscal 2018 and has seen its stock prices plummet over the last year.

“It is brutally painful to watch the Company chisel away at its real estate portfolio to fund low-return investments into the business,” Gramm wrote.

Bandera’s slate of board candidates includes former Sen. Phil Gramm (Jefferson Gramm’s father) and Bertucci’s Restaurants CEO Brian Wright.

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