Edgar Filing: LUBYS INC

dfan14a06297031_01042008.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No. )

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¨ Preliminary Proxy Statement

¨ Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2))

¨ Definitive Proxy Statement

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¨ Soliciting Material Under Rule 14a-12

LUBY’S, INC.

(Name of Registrant as Specified in Its Charter)

STARBOARD VALUE AND OPPORTUNITY MASTER FUND LTD.

PARCHE, LLC

RCG ENTERPRISE, LTD

RCG STARBOARD ADVISORS, LLC

RAMIUS CAPITAL GROUP, L.L.C.

C4S & CO., L.L.C.

PETER A. COHEN

MORGAN B. STARK

JEFFREY M. SOLOMON

THOMAS W. STRAUSS

STEPHEN FARRAR

WILLIAM J. FOX

BRION G. GRUBE

MATTHEW Q. PANNEK

JEFFREY C. SMITH

GAVIN MOLINELLI

(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)

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On November 30, 2007, Starboard Value and Opportunity Master Fund Ltd. (“Starboard”), an affiliate of Ramius Capital Group, L.L.C. (“Ramius Capital”), together with the other participants named herein, made a definitive filing with the Securities and Exchange Commission (“SEC”) of a proxy statement and an accompanying GOLD proxy card to be used to solicit votes for the election of its nominees at the 2008 annual meeting of shareholders of Luby’s, Inc., a Delaware corporation (the “Company”).

Item 1: On January 4, 2008, Starboard issued the following press release:

RAMIUS CAPITAL SENDS LETTER TO SHAREHOLDERS OF LUBY’S

Cites Numerous Conflicts of Interest Between the Pappases, Luby’s, and Private Pappas Entities

Urges Shareholders to Vote FOR Independent Nominees Farrar, Fox, Grube and Pannek on the GOLD Proxy Card

New York – January 4, 2008– Starboard Value and Opportunity Master Fund Ltd., an affiliate of RCG Starboard Advisors, LLC and Ramius Capital Group, L.L.C. (collectively, “Ramius”), today issued a letter to all shareholders of Luby’s Inc. (“Luby’s” or the “Company”) (NYSE: LUB) in which Ramius urged all shareholders to vote for its four independent and highly distinguished director nominees at the Company’s Annual Meeting of Stockholders scheduled for January 15, 2008.

Ramius Partner Jeffrey Smith stated, “Luby’s Board continues to distort the facts and mislead shareholders in an effort to mask the current Board’s lack of experience, the Company’s underperformance, and the material conflicts of interest that exist between Luby’s and the Pappas entities. The truth is the Pappases and the Board have real and material conflicts of interest and this Board has enriched the Pappases at the expense of shareholders. Shareholders cannot continue to stand by and allow this to continue. Electing independent nominees – Mr. Farrar, Mr. Fox, Mr. Grube and Mr. Pannek – is the only way to ensure that our efforts to bring about true accountability at Luby’s will be successful.”

Mr. Smith added, “Our truly independent nominees are just more qualified than Luby’s incumbent nominees in terms of relevant industry and finance experience.”

The full text of the letter follows:

January 4, 2008

Dear Fellow Luby’s Shareholder:

ACT NOW TO ELECT TRULY INDEPENDENT AND EXPERIENCED DIRECTORS COMMITTED TO IMPROVING LUBY’S

PROXY GOVERNANCE, A LEADING PROXY ADVISORY FIRM, SUPPORTS CHANGE TO THE LUBY’S BOARD AND RECOMMENDS VOTING ON OUR GOLD PROXY CARD

SIGN, DATE, AND RETURN THE ENCLOSED GOLD PROXY CARD TODAY

We urge you to show your support by voting ‘FOR’ the election of Stephen Farrar, William J. Fox, Brion Grube, and Matthew Q. Pannek to the Board of Directors of Luby’s at the January 15, 2008 annual meeting. We are not seeking control of the Company. Rather, if elected, these four independent nominees will work to enhance shareholder value by ensuring that the Company is being managed in the best interest of all shareholders. These nominees possess significant knowledge of the broader restaurant industry, including the casual and fast-casual restaurant segments and Luby’s in particular, as well as broad corporate finance expertise. Indeed, our nominees have already communicated with you directly by letter on some of the strategic initiatives they have formulated for improving Luby’s.

Unfortunately, the current Luby’s Board and management have chosen to run a campaign that evades legitimate shareholder concerns about the Company’s performance, the Board’s lack of relevant experience, and the material conflicts of interest that exist between Luby’s and the Pappas entities. Luby’s latest letter to shareholders is filled with inaccuracies and false statements regarding the qualifications of our independent nominees, their ideas for strategic changes at Luby’s, and absurd allegations that our nominees are somehow conflicted. Do not be fooled by their attempts to steer this campaign away from the critical issues. We urge you to focus on the facts so that you can make an informed decision.

PROXY Governance, INC., a leading proxy advisory firm, agrees with our assessment that change is necessary in order for shareholders to realize the full value of their investment. Our interests are entirely aligned with yours. Shareholders deserve the opportunity to elect highly experienced and truly independent directors to ensure that Luby’s will be best positioned for success. We urge you to sign, date, and return the enclosed GOLD proxy card today with a vote FOR our nominees.

THE PAPPASES ARE THE ONES WITH REAL, MATERIAL CONFLICTS OF INTEREST

In its December 31, 2007 and January 2, 2008 letters to shareholders, the Luby’s Board would have you believe that the Ramius nominees are somehow conflicted due to immaterial compensation from us of $5,000 in cash and a carried interest on $20,000 in stock as disclosed in our proxy statement. This could not be further from the truth. This modest compensation agreement with our nominees is strictly meant to align their interests with those of all shareholders in a manner similar to stock options and restricted stock grants that are issued to members of the board of directors.

On the other hand, the Pappases have real and material conflicts of interest. Just to name a few of the conflicts:

§	the Pappases act as Luby’s landlord in multiple locations;

§	the Pappases hire their own private entities to provide services to Luby’s;

§	the Pappas entities pay substantial compensation to at least one Luby’s board member;

§	the Pappas entities have paid substantial compensation to Luby’s general counsel for legal consulting; and

§	Luby’s pays consulting fees to the Treasurer of the Pappas entities.

In the aggregate, these conflicts amount to payments of MILLIONS of dollars. These conflicts must be reviewed and closely monitored by the independent members of the Luby’s Board. We believe the current Board is not fulfilling its duty to closely monitor these serious and material conflicts.

OUR NOMINEES ARE MORE QUALIFIED TO SERVE ON THE LUBY’S BOARD

Clearly, Luby’s current Board and management have not researched the qualifications and track records of our nominees. Instead, they have chosen to disparage these highly qualified individuals by making misleading and incorrect statements about their prior experiences. Here are the facts about our nominees:

Stephen Farrar

As a Senior Vice President of Wendy’s, Mr. Farrar created the Super Value Menu (now known as the Dollar Menu), Service Excellence, and Late Night initiatives which significantly increased customer traffic and added more than $500,000 to average unit volumes. Mr. Farrar was instrumental in developing senior management talent and building out new stores. Mr. Farrar was asked by the current management at Wendy’s to accept a promotion to Executive Vice President of Operations of Wendy’s in 2006 but elected to retire after 26 years at the Company. Mr. Farrar was inducted into the Wendy’s Hall of Fame as a result of his tremendous accomplishments.

William J. Fox

Mr. Fox is a financial expert with 30 years of experience in leadership roles on public boards, including service as Chairman of the audit committees of five public companies and overseeing auditor relationships with each of the Big 4 accounting firms. Luby’s would like you to believe that Mr. Fox was sued as a senior executive of a public company. The truth is, Mr. Fox was merely deposed to confirm the dates of board meetings and the nature of board discussions.

Brion Grube

As Senior Vice President of both Wendy’s International Division and the Canada Division, Mr. Grube returned both struggling segments to profitability. This was the first time either of these segments was ever profitable. While at Wendy’s Canada, Mr. Grube received the Canadian Franchise Award of Excellence in both 1997 and 1999 and developed 170 new restaurants. Due to Mr. Grube’s achievements, he was asked to become the CEO of Café Express and Baja Fresh, two struggling concepts owned by Wendy’s. Prior to leaving Wendy’s, Mr. Grube developed a restructuring plan for Café Express and executed on a sale of Baja Fresh. Mr. Grube was inducted into the Wendy’s Hall of Fame because of his remarkable operational abilities and accomplishments while at Wendy’s.

Matthew Q. Pannek

After extremely successful careers as the Acquisition and Capital Placement Manager of Maverick Capital Equity Partners, the CFO of Aaron Brothers, Inc, and the Director of Accounting and Finance at Brinker International, Mr. Pannek became CFO and then CEO of Fuddruckers and Koo Koo Brands. As the CEO, Mr. Pannek successfully executed a turnaround as that company was near bankruptcy, by significantly improving EBITDA margins, closing a successful refinancing, instituting a franchise centric organization, and implementing a new branding and marketing strategy that drastically reduced marketing expense.

In total, our nominees have 73 years of proven restaurant industry experience. In contrast, the current independent members of Luby’s Board have absolutely no restaurant experience outside of their involvement in Luby’s.

LUBY’S BOARD IS CONFLICTED AND HAS REPEATEDLY FAVORED THE INTERESTS OF THE PAPPASES OVER ALL OTHER SHAREHOLDERS

Since the Pappases first became involved in Luby’s, the current Board has overseen a long list of actions that are clearly not in the best interest of Luby’s shareholders. The Board has:

§	Accepted unfavorable contract terms between Luby’s and Pappas entities;

§	Granted Ernest Pekmezaris, the Treasurer for Pappas Restaurants, a contract for $150,000 per year for “consulting services” to Luby’s;

§	Allowed the Pappases to call a default on their $10 million convertible note and subsequently adjust the conversion price from $5.00 to $3.10 while the stock price was at $5.63, effectively issuing them an additional 1.2 million shares;

§	Allowed the Pappases to gain effective control of the Company without paying shareholders a control premium through an exemption to the poison pill;

§	Permitted Luby’s to enter into lease agreements with the Pappases on unfavorable terms to Luby’s that benefit the Pappases; and

§	Chosen to ignore shareholders’ desire to declassify the Board even after the majority of shareholders have voted to declassify the Board for six out of the past seven years.