Thursday, August 02, 2007

Luby's to Consider Sale Leaseback of Restaurant Portfolio?

Yahoo! Finance - July 30, 2007

Investment adviser Ramius Capital Group LLC and affiliated funds have asked the chief executive of Luby's Inc. to consider a sale of the restaurant chain, according to a regulatory filing Monday with the Securities and Exchange Commission.

"Given the available sources of financing, we believe a private equity firm could purchase Luby's at the current market price with little or no equity consideration," wrote Ramius partner Jeffrey C. Smith in a letter to Luby's President and CEO Christopher Pappas. Smith said Luby's could attract a "significant premium in a competitive sale process."

As an alternative, Smith also proposed a sale and leaseback transaction along with a stock buyback and special dividend. Smith estimated that Luby's real estate is worth between $206 million and $265 million pretax in a sale and leaseback transaction.

Smith also said the involvement of Pappas and other Luby's officers in the Pappas Restaurants chain, which is privately owned by the CEO and his brother, is creating conflicts and distractions that prevent action to increase shareholder value at Luby's.

A Luby's spokesperson was not immediately available for comment.

Ramius and its affiliates own a 6.5 percent stake in Luby's and claim to be the restaurant chain's largest independent shareholder. Smith asked Pappas to retain a strategic adviser to help pursue one of the two options. Sphere: Related Content

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