Luby’s North Mesa location in February 2020 | Photo courtesy Google Earth
Tuesday morning, officials with Luby’s announced that the Company’s Board of Directors, after considering a number of strategic alternatives, has approved and adopted a plan that provides for the sale of the Company’s assets and distribution of the net proceeds to the Company’s stockholders, effectively dissolving the company.
The announcement follows Luby’s June 3, 2020 announcement that the company was seeking the sale of its assets. Approval of the Plan by the Company’s stockholders is the next step according to company officials.
The assets to be sold include operating divisions Luby’s Cafeterias, Fuddruckers, and the Company’s Culinary Contract Services business, as well as the Company’s real estate.
“The Company intends to hold a special meeting of stockholders to seek approval of the Plan for which it will file preliminary proxy materials with the Securities and Exchange Commission. The Company believes that the sale of assets pursuant to its monetization strategy and the dissolution will provide stockholders with an opportunity to receive cash distributions that maximize the value of their investment,” company officials shared via a news release.
Christopher J. Pappas, Chief Executive Officer and President of Luby’s, said, “We believe that moving forward with a Plan of Liquidation will maximize value for our stockholders, while also preserving the flexibility to pursue a sale of the Company should a compelling offer that delivers superior value be made. The Plan also continues to provide for the potential to place the restaurant operations with well-capitalized owners moving forward.”
Company officials added that, “If at any time, including after the Plan is approved by stockholders, the Company receives an offer for a corporate transaction that, in the view of the Board of Directors, will provide superior value to its stockholders in comparison to the value of the estimated distributions under the Plan, taking into account factors that could affect valuation, including timing and certainty of closing, credit market risks, proposed terms and other factors, the Plan could be abandoned in favor of such an alternative transaction.”
The decision by the Board to approve the Plan follows a comprehensive review of the Company’s operations and assets led by a Special Committee of the Board comprised of independent directors Gerald Bodzy, Twila Day, Joe McKinney, Gasper Mir, John Morlock, and Randolph Read. Messrs. Bodzy and Read, Co-Chairmen of the Special Committee, jointly commented:
“This Plan of Liquidation is the next logical step in the Company’s previously announced plan to maximize value of the Company through the sale of its operations and assets. Our stockholders have expressed their support for seeking alternatives to continuing to operate the Company’s restaurants in their current form, and we believe the Plan of Liquidation will allow the Company to accomplish that task in the most efficient manner.”
The Plan of Liquidation outlines an orderly sale of the Company’s businesses, operations, and real estate, and an orderly wind down of any remaining operations. If the Company’s stockholders approve the Plan, the Company intends to attempt to convert all of its assets into cash, satisfy or resolve its remaining liabilities and obligations, including contingent liabilities and claims and costs associated with the liquidation of the Company, and then file a certificate of dissolution.
The Company currently anticipates that its common stock will be delisted from the NYSE upon the filing of the certificate of dissolution, which is not expected to occur until the earlier of the completion of the asset sales or three years, but the delisting of its common stock may occur sooner in accordance with the applicable rules of the NYSE.
Headquartered in Houston, Luby’s was founded and opened in 1947 by Bob Luby. In addition to their locations in El Paso, the company has locations across Texas, including Austin, Dallas, Fort Worth, and San Antonio.