Luby's, Inc has announced that it will immediately be pursuing the sale of its operating division and assets - including all real estate assets, in a statement released June 3, 2020.
The statement said that the course of action was decided upon after reviewing the Company's operations, including the impact of the COVID-19 pandemic, and considering several strategic alternatives available that will maximize stockholder value.
Luby's is exploring the possibilities of selling its operating divisions: Luby's Cafeteria, the Fuddruckers, and Luby's Culinary Contract Services, including its real estate, or even selling the Company in its entirety. Certain restaurants of the Company will remain open to serve guests.
Net proceeds from the sale will be used for repaying the Company's debt as well as its other obligations; the remainder of the proceeds will be distributed to the shareholders. No definitive timeframe has been established yet for completing the sale and distributing the proceeds. A formal plan may likely be adopted by the board subject to the approval of the stockholders.
The Company believes that proceeding with the sale process and then distribution will maximize value for Luby's stockholders, Luby's Chief Executive Officer and President, Christopher J. Pappas, said. He added that Luby's also preserves the flexibility to pursue the sale of the Company in its entirety should there be a compelling offer that will deliver superior value to its stockholders.
Duff & Phelps Securities, LLC will assist Luby's with the sale of its Luby's Cafeteria and Culinary Contract Services while Brookwood Associates, LLC. will help with Luby's Fuddruckers' sale.
About Luby's
Luby's, Inc. (NYSE: LUB) is a multi-branded company that operates in the food industry: restaurant and contract food services. Luby's is managed through its company-owned restaurants, franchise operations, and its Culinary Contract Services. Luby's owns Luby's Cafeteria, Fuddruckers, and Cheeseburger in Paradise, and two non-core restaurant locations of other brand names.
Luby's, Inc. has, for the last two years, been pursuing efforts to turn around its operational and financial performance, Houston Business Journal reported, including the closing and selling off underperforming restaurants and converting Fuddruckers sites to franchise sites.
In March 2020, Restaurant Business reported that Luby's closed 35 of its remaining 72 restaurants while a majority of headquarters staff were furloughed, and the remaining office staff has their pay cut by half. In response to the coronavirus pandemic, on-premise dining was suspended at all of Ruby's restaurants in response to the pandemic.
Luby's reopened its restaurants for limited dine-in service in early May, beginning with those locations that have been offering food-to-go, according to Houston Business Journal. Sales have been at 75 percent of their weekly levels before the pandemic.
Due to the shutdown forced by the COVID-19 pandemic, casual dining sales softened, according to The Boulder Group and as cited by GlobeSt.com. The drop in sales resulted as restaurants shifted to delivery and carry-out service. Despite the 27 basis points cap rates year-over-year increase, the overall net lease sector saw a 12 basis points decline. Casual dining properties have been priced at a 44-basis point discount to the entire net lease retail in the first quarter of 2020 alone.
