NEW YORK (Reuters) - Casual dining chain Luby’s Inc said on Friday it had defeated a long-term shareholder’s bid for four board seats, as investors sided with management and elected all nine of the company’s director nominees.
The support from investors ended the company’s proxy fight with Bandera Partners, a New York-based hedge fund that owns roughly 10 percent of Luby’s shares and demanded more accountability and oversight by the board.
From the start, it was an uphill battle for Bandera because some 37 percent of the stock is controlled by the Pappas family.
In recent days Bandera had reached out to other shareholders and proxy advisory firms backed some of the hedge fund’s ideas and highlighted its concerns.
A week ago Luby’s took action and announced plans to invite two new independent directors to replace two sitting members. It also said it would select a new chair, in steps that may have swayed some investors to side with management instead of backing the activist Bandera, analysts said.
After the vote on Friday, Gasper Mir III, Luby’s independent chair, sounded a conciliatory note to the activist. “We will welcome the input and views of Bandera Partners during our board refreshment process and will be seeking to engage further with them in the near term,” he said in a statement.
The company’s stock price, which is thinly traded, seesawed on Friday, first rising 6 percent and then tumbling to end down 13.8 percent at $1.56. Over the last year, it has fallen 40 percent.
Bandera, run by co-founder Jeff Gramm, has owned Luby’s stock for more than a decade but Gramm’s patience ran out last year when he mounted his first proxy contest to protest the company’s sinking share price and what he called “unfulfilled promises” and excessive executive and director compensation.
“We believe we won the vast majority of votes from non affiliated shareholders,” Gramm told Reuters, adding “It is clear to me that shareholders are frustrated with the company and desperate for change in the boardroom.”
Investors backed management even after proxy advisers Institutional Shareholder Services and Egan-Jones recommended investors elect Gramm and his father, former U.S. Senator Phil Gramm to the board. Glass Lewis, another advisory firm, recommended that investors add Jeff Gramm.
ISS, which supported the Gramms, wrote: “The incumbent board has overseen alarming underperformance over the past decade and deteriorating financials over the past five years.”
Law firm Sidley Austin represented Luby’s and Kleinberg, Kaplan, Wolff & Cohen represented Bandera.
Reporting by Svea Herbst-Bayliss; editing by Tom Brown and Grant McCool