8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): December 24, 2018

Luby’s, Inc.
(Exact name of registrant as specified in its charter)

Delaware	1-8308	74-1335253
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

13111 Northwest Freeway, Suite 600
Houston, Texas 77040
(Address of principal executive offices, including zip code)

(713) 329-6800
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Item 8.01 Other Events.

On December 24, 2018, Luby’s, Inc. (the “Company”) issued a press release announcing that it had mailed a letter to shareholders of the Company in connection with the Company’s upcoming Annual Meeting of Shareholders to be held on January 25, 2019. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 8.01.

Also on December 24, 2018, outside counsel to the Company delivered a letter (the “Response Letter”) to outside counsel for Bandera Master Fund L.P. (“Bandera”) regarding Bandera’s demand to inspect the books and records of the Company. A copy of the Response Letter is attached hereto as Exhibit 99.2 and is incorporated herein by reference into this Item 8.01.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are filed herewith:

Exhibit Number	Description
99.1	Press release dated December 24, 2018
99.2	Response Letter dated December 24, 2018

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 26, 2018	LUBY’S, INC.
	By:	/s/ Christopher J. Pappas
		Christopher J. Pappas
		President and Chief Executive Officer

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EX-99.1

Exhibit 99.1

Luby’s Inc. Sends Letter to Shareholders

Change is Underway at Luby’s – Company is Aggressively Executing on Plan to Increase Profitability and Improve Share Price

Luby’s Board and Management Possess Deep Industry Experience and Their Interests are Fully Aligned with Shareholders

Activist Investor Bandera Partners’ Perplexing Pattern of Engagement Calls into Question Suitability of its Nominees for Any Board

Bandera Nominees Lack Meaningful Restaurant Industry and Public Company Board Experience

Vote on the WHITE Proxy Card Today to Protect Your Investment in Luby’s

HOUSTON, TX – December 24, 2018 – Luby’s, Inc. (NYSE: LUB) (“Luby’s” or the “Company”) today announced that it has mailed a letter to shareholders in connection with the Company’s upcoming Annual Meeting of Shareholders (“Annual Meeting”) to be held on January 25, 2019. The full text of the letter follows.

December 24, 2018

Dear Shareholders,

At our Annual Meeting of Shareholders on January 25, 2019, you will face a critical decision that will significantly impact the future of your investment in Luby’s. You will be asked to choose between two vastly different paths for the Company:

ü Elect the seasoned and highly-qualified nominees put forth by Luby’s, who collectively possess decades of restaurant industry experience, and whose 36.8% ownership in the Company ensures the strongest possible alignment of interests with all shareholders; or

û Put your investment at risk by electing four nominees hand-picked by New York-based activist hedge fund Bandera Partners LLC (“Bandera”), who have almost zero meaningful industry experience and we believe view the Company as a financial engineering vehicle to further their own interests at the expense of Luby’s customers and you, the shareholders.

In making this important decision, we ask you to consider the following: 

Change is already underway at Luby’s and the Board is fully focused on improving the Company’s performance and stock price

Luby’s Board and management team are in the midst of executing an aggressive plan to improve our financial results and operating performance – against the backdrop of strong industry headwinds and a highly competitive restaurant environment that has challenged many mature restaurant brands, including ours. This turnaround strategy includes evaluating multiple ways to lower costs and improve operations, steps to significantly reduce debt, and the addition of new voices and perspectives at both the senior management and Board level.

We are continuously taking a hard look at our portfolio of restaurant locations and have taken decisive action to improve profitability. We announced an asset sales program of $25 million in April 2018 and expanded this program up to $45 million in July 2018, with the goal of strengthening our balance sheet and decreasing our debt. 10 Company-owned property locations were sold in fiscal 2018, generating $14.8 million in net cash proceeds. 21 underperforming Company-owned restaurants were closed in fiscal 2018 and nine were closed in fiscal 2017. In recognition of the fact that Luby’s business needs to improve, CEO Chris Pappas reduced his annual salary to only $1, and committed to keeping it at that amount until the Company’s turnaround efforts bear fruit for Luby’s shareholders.

The Luby’s and Fuddruckers brands are highly regarded in the marketplace, and we believe these brands can thrive and grow over time. In order to meet the customers where they are, we continued re-directing funds from a traditional media strategy (TV, radio, billboards, direct mail, sponsorships) to a digital media strategy (on-line advertising, geo-fencing, E-club promotions) which allows us to connect and engage directly with our guests in a more personal and relevant manner. We also made further improvements to our mobile ordering capabilities at Fuddruckers and geared up for launching similar capabilities for our Luby’s cafeteria guests.

In October 2018, we announced the promotion of Benjamin “Todd” Coutee to the position of Chief Operating Officer. Todd has more than 30 years of restaurant experience. Importantly, he knows this industry and he knows our Company, our brands and our people extremely well. Todd also has held several significant leadership roles at Luby’s and achieved proven results, including in his most recent position as Senior Vice President of Culinary Contract Services, which has been growing significantly for the past two years under his watch.

On December 14^th, we announced that Luby’s entered into an $80 million refinancing credit facility with MSD Partners, providing funding to help reduce the Company’s debt balance as we continue to aggressively strengthen our financial position.

We recently added Twila Day to our slate of director nominees for the 2019 Annual Meeting, replacing Luby’s General Counsel Peter Tropoli as a director and thereby further increasing the number of independent directors. Ms. Day is currently Chief Information Officer of the Huntsman Corporation, a global chemical manufacturer and marketer. Previously, she was the National Practice Leader for Technology Services at Alvarez and Marsal, one of the most highly-respected professional services firms in the world. Prior to Alvarez, Ms. Day was Chief Information Officer at SYSCO Corporation (NYSE:SYY), the global leader in distributing food products to restaurants.

Luby’s believes that Ms. Day’s extensive leadership experience and broad technology expertise will be highly valuable as we continue to examine how to best implement tech solutions across the Company, both to enhance productivity and improve customer experience.

Your Board and management team have the right restaurant industry, operational and financial experience needed to successfully turn around the Company and enhance your investment – and they are aligned with shareholders’ best interests

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The experience of the current Board has never been more essential than now as the entire restaurant sector faces challenges driven by oversaturation in many markets and a fundamental evolution in the way consumers think about dining.

Importantly, Luby’s leadership has successfully steered the Company through previous difficult periods in the restaurant industry cycle – most notably when CEO and Director Chris Pappas and Director Harris Pappas took over Luby’s in 2000 and in 2008 following the global financial crisis. In each case, the Company was able to streamline operations, reduce its store count and debt – and ultimately improve financial results and Luby’s stock price. This expertise will be essential as Luby’s continues to manage through the current downturn in the industry cycle – and ultimately establish a foundation for future profitability.

CEO and Director Chris Pappas and Director Harris Pappas have the strongest possible incentive to create shareholder value. They beneficially own together approximately 36.8% of the Company’s stock – meaning they have more skin in the game than anyone, and more than three and a half times as much at stake as Bandera and its nominees – none of whom have meaningfully acquired any Company shares other than what Jeff Gramm holds through his fund.

The best path to unlocking the value of Luby’s assets is to execute against the Board’s turnaround plan, improve results and enhance the stock price

In spite of what Bandera might believe, the value of Luby’s is more than just its owned real estate – the Company’s restaurant operations and brands have significant value as well.

As stated above, we are already in the process of monetizing underperforming restaurant locations, which will allow us to strengthen our core operations and invest appropriately in the right assets with better return characteristics to ultimately improve our overall financial results.

Further, the value of the Luby’s brands cannot be discounted. According to a recent survey by a major industry trade publication, Nation’s Restaurant News, the Luby’s Restaurant brand ranks in the top 20 nationally in brand loyalty, based on the percentage of customers who “visit because of a real desire to experience the brand, as opposed to convenience.” In the same survey Fuddruckers was ranked by consumers in the top 10 for taste, with 82% rating the chain “best in class” or “above average” for taste. Notably, highly popular and fast-growing chains like In-N-Out Burger, Chick-fil-A and Panera Bread were among the winners.¹

We believe the value of the entire Luby’s enterprise is worth meaningfully more than where the stock is currently trading. In our view, taking drastic steps to “monetize” only the Company’s real estate now, or otherwise break up the Company’s assets, would be tantamount to “selling at the bottom.”

Luby’s Board and management team have shown in the past the ability to execute against a strategic plan, manage through industry headwinds and deliver improved results. We are always open to all strategic options to maximize shareholder value, but believe that taking a short-term view would not be in the best long-term interest of shareholders.

¹ “Top brands ranked by customer loyalty” Consumer Picks 2018, Nation’s Restaurant News, 2018.

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Bandera’s pattern of confusing and concerning behavior throughout its engagement with Luby’s calls into question whether Bandera principal Jeff Gramm – or anyone nominated by him – is suited to sit on any public company board

Bandera approached Luby’s only nine days before the deadline for nominating directors and demanded three seats on the Board, threatening to launch a proxy fight if its demands were not met. As a courtesy to them, Luby’s extended the nomination deadline to consider Bandera’s demands. Bandera demanded the appointment of Mr. Jeff Gramm, Senator Phil Gramm, and Mr. Timothy Brog, a close business associate of Mr. Gramm’s, to the Board while setting the size of the Board at nine directors. To be clear, this meant that Bandera was demanding a third of the seats on the Luby’s Board. Notwithstanding our extension, Bandera gave us only roughly 48 hours to agree to their demands.

A public company board cannot responsibly make decisions blindly on such a tight timeframe – especially when it comes to director nominees who most of our Board members have never met. The Board requested to interview two of Bandera’s nominees – Savneet Singh and Brian Wright – but Bandera then illogically insisted there must be first “a settlement agreement in place” and “then Luby’s and Bandera can agree to have specific nominees interviewed […] to fill the number of seats that the settlement agreement provides.” Just as Luby’s wouldn’t agree to hire any employee without first interviewing the candidate, the Board would not agree to appoint directors without interviewing them first and assessing their suitability. Following a similar pattern as with Mr. Brog, Mr. Wright was ultimately left off Bandera’s slate. No explanation was given for either removal.

Bandera’s conduct indicates that they fundamentally do not understand the duties and responsibilities of a public company board. The Board carefully considers any potential nominees, and there is a process in place to vet and interview such nominees. Agreeing to put candidates on the Board before the Board has even interviewed them would be tantamount to a breach of the Board’s fiduciary duties to shareholders.

Bandera’s nominees do not have the appropriate skillsets, experience or track records to justify replacing Luby’s highly-qualified directors

It is important to note that the nominees put forward by Bandera do not possess meaningful restaurant operating experience. So far the full extent of a “plan” for the Company offered up by Bandera could fit on a Fuddruckers napkin. Taken together, this information is highly troubling as it suggests that if given Board representation Bandera will likely push for liquidating the Company or selling off its real estate assets – a path we fully believe would short change Luby’s shareholders, employees and customers.

Jeff Gramm previously wrote a book on shareholder activism: Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism. But writing this book – predominately a compilation of open letters authored by well-known hedge funds – does not qualify Jeff Gramm as an expert in creating shareholder value. As he himself states in the book, “Over time, I’ve learned I’m much better suited to finding good investment ideas than managing activist interventions or serving on corporate boards.”² We couldn’t agree more.

² Gramm, Jeff. “Introduction.” Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism, Harper Business, 2016, p. XIX.

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Notably, the entire slate of four directors nominated by Bandera have close ties to the Gramm family, starting with Senator Phil Gramm, his father. For this reason, we find it hard to believe Bandera’s claims that its nominees, if elected, would act as truly independent Board members, unbeholden to Bandera and its principal Jeff Gramm.

***

We believe that electing our proposed slate of highly-qualified nominees for the Luby’s Board is the best choice to maximize the value of your investment in Luby’s and improve the Company’s share price.

Luby’s current Board and management team are successfully executing against a strategic plan designed to build long-term value for all our shareholders, and we are deeply aligned with your best interests.

In stark contrast, the activist investor nominees possess virtually no restaurant operating experience, raising the question: who do you want charting the strategic course of Luby’s – seasoned executives who have successfully navigated through these waters before, or a group led by an academic and book author who wants to test out his theories with your investment?

VOTE FOR YOUR BOARD’S NOMINEES ON THE WHITE PROXY CARD TODAY

DO NOT SIGN ANY GOLD PROXY CARD SENT TO YOU BY BANDERA PARTNERS

Sincerely,

The Board of Directors of Luby’s, Inc.

YOUR VOTE IS IMPORTANT

VOTE FOR THE LUBY’S NOMINEES ON THE WHITE PROXY CARD TODAY

If you have any questions or require any assistance with respect to voting your shares, please contact the Company’s proxy solicitor, Morrow Sodali:

509 Madison Avenue, Suite 1206

New York, NY 10022

Toll Free: (800) 662-5200

Direct: (203) 658-9400

E-mail: lub@morrowsodali.com

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Forward-Looking Statements

This letter may contain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this letter, other than statements of historical fact, are “forward-looking statements” for purposes of these provisions, including the statements under the caption “Outlook” and any other statements regarding scheduled openings of units, scheduled closures of units, sales of assets, expected proceeds from the sale of assets, expected levels of capital expenditures, effects of food commodity costs, anticipated financial results in future periods and expectations of industry conditions. Luby’s cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward-looking statements made from time-to-time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of Luby’s. The following factors, as well as any other cautionary language included in this letter, provide examples of risks, uncertainties and events that may cause Luby’s actual results to differ materially from the expectations Luby’s describes in such forward-looking statements: general business and economic conditions; the impact of competition; our operating initiatives; fluctuations in the costs of commodities, including beef, poultry, seafood, dairy, cheese and produce; increases in utility costs, including the costs of natural gas and other energy supplies; changes in the availability and cost of labor; the seasonality of Luby’s business; changes in governmental regulations, including changes in minimum wages; the effects of inflation; the availability of credit; unfavorable publicity relating to operations, including publicity concerning food quality, illness or other health concerns or labor relations; the continued service of key management personnel; and other risks and uncertainties disclosed in Luby’s annual reports on Form 10-K and quarterly reports on Form 10-Q. We undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the subject of these statements, except where we are expressly required to do so by law.

About Luby’s

Luby’s, Inc. (NYSE: LUB) operates 142 restaurants nationally: 82 Luby’s Cafeterias, 58 Fuddruckers, and 1 Cheeseburger in Paradise. The Company is also the franchisor for 103 Fuddruckers franchise locations across the United States (including Puerto Rico), Canada, Mexico, Panama, and Colombia. Luby’s Culinary Contract Services provides food service management to 30 sites consisting of healthcare, higher education, sport stadiums, and corporate dining locations.

Contacts

Investors:

Morrow Sodali

Charlie Koons / Mike Verrechia
Toll Free: (800) 662-5200

Direct: (203) 658-9400
lub@morrowsodali.com

Media:

Sloane & Company
Dan Zacchei / Joe Germani, 212-486-9500
dzacchei@sloanepr.com / jgermani@sloanepr.com

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EX-99.2

Exhibit 99.2

Sidley Austin LLP 787 Seventh Avenue New York, NY 10019 +1 212 839 5300 +1 212 839 5599 Fax Kai Haakon E. Liekefett +1 (212) 839-8744 kliekefett@sidley.com AMERICA ● ASIA PACIFIC ● EUROPE

December 24, 2018

Via Email

A. Thompson Bayliss
Abrams & Bayliss LLP
20 Montchanin Road, Suite 200

Wilmington, DE 19807

Re: Demand for Stockholder List of Luby’s, Inc.

Dear Mr. Bayliss:

On behalf of our client, Luby’s, Inc., (the “Company” or “Luby’s”), we are replying to your letter of December 21, 2018 regarding the Demand for Stockholder List Material of your client Bandera Master Fund L.P. (“Bandera”).

To be frank, we were surprised and amazed by your letter. The two provisions your client objects to in the draft confidentiality agreement are intended to protect the privacy of Luby’s shareholders, many of whom are retail shareholders, in the event that your client breaches that agreement. These provisions are very common and were included in dozens of confidentiality agreements in connection with comparable books and records demands made pursuant to Section 220 of the Delaware General Corporation Law. In fact, it is truly remarkable to think about the nature of the provisions Bandera declines to accept:

● A “loser pays” clause, which provides that if there is a lawsuit related to the confidentiality agreement, the prevailing party is entitled to cost reimbursement. Bandera should welcome this clause because it ensures that Bandera could recover the cost from any frivolous litigation—unless Bandera intends to breach the confidentiality agreement, of course.

● An “all necessary measures” clause, which holds Bandera responsible for any breach of the confidentiality agreement by its representatives and requires Bandera to take all necessary measures to prevent that end. This provision is entirely reasonable because our client has no control over Bandera’s ability to share with third parties private data regarding our shareholders.

Sidley Austin (NY) LLP is a Delaware limited liability partnership doing business as Sidley Austin LLP and practicing in affiliation with other Sidley Austin partnerships.

 

Page 2

In essence, neither of these provisions is of any import unless a court determines that your client or one of its representatives breached the confidentiality agreement.

Not surprisingly, you have not provided any case law supporting a refusal to agree to these provisions, which serve to protect the Company should your client breach the confidentiality agreement. All you could dig up was a reference to an off-hand remark in an obscure transcript of a case conference from over 12 years ago addressing a different situation altogether. It appears that rather than signing and complying with a standard confidentiality agreement, Bandera preferred to engage a second law firm and threaten a lawsuit.

It has become obvious what your client is trying to accomplish here: Bandera is desperately trying to manufacture a pretext to draw Luby’s into litigation for public relations purposes, as the inflammatory language in your letter demonstrates:

● It is brazen and simply wrong to accuse our client of a “calculated strategy to delay.” Your client took four days to respond to our proposed confidentiality agreement we sent on December 13. Even though your client sent a heavy mark-up, we persuaded Luby’s to take many of the comments. But instead of picking up the phone and expediently resolving the last two open items last week, Bandera wasted yet another four days by hiring another law firm and threatening a lawsuit. Your client could have had the stockholder list materials over ten days ago. The delay is entirely of Bandera’s own making.

● Your other wild accusation that Luby’s is “accelerating the date of the stockholder meeting” is similarly belied by the facts. The record will show that the Company scheduled the annual meeting for January 25 already back in October, long before your client ambushed Luby’s with its eleventh hour surprise proxy contest. The annual meeting date is over one month out, which is more than enough time for your client to solicit proxies.

The Company has no interest in aiding and abetting Bandera in your client’s ham-handed attempt at a public relations stunt and will not waste shareholders’ money on this matter any further. Even though the two provisions in question exist solely to protect Luby’s shareholders, the Company will live without them and hope that Bandera will not breach the confidentiality agreement.

 

Page 3

Therefore, upon receipt of a signed copy of your proposal final version of the confidentiality agreement, the Company will make available to Bandera, during the usual hours of business (e.g., upon offices reopening after the Christmas holiday on Wednesday, December 26), the information that Bandera is entitled to inspect and copy pursuant to Section 220 of the Delaware General Corporation Law. Rest assured, however, that we will be watching Bandera’s treatment of our shareholders’ data closely and are prepared to go to court immediately if Bandera does not respect and protect the privacy of Luby’s shareholders.

The court of public opinion will judge your client’s conduct. I am confident shareholders will see matters as we do: Bandera is behaving like an aggressive bully who does not even begin to understand the duties and obligations of a public company board.

Should you have questions regarding the foregoing, please call me at (212) 839-8744 instead of writing another of these letters.

Happy Holidays,

/s/ Kai Haakon E. Liekefett

Kai Haakon E. Liekefett

cc: Peter Tropoli, General Counsel & Corporate Secretary, Luby’s, Inc.

George Vlahakos, Partner, Sidley Austin LLP

Andrew Stern, Partner, Sidley Austin LLP