Luby’s announced Monday that it has agreed to sell Luby’s Cafeteria for $28.7 million to an affiliate of businessman Calvin Gin.
The acquisition by the Gin affiliate, which will be renamed Luby’s Restaurant Corporation after the transaction closes, includes 32 locations—all based in Texas—and ownership of the Luby’s Cafeteria brand. The transaction does not include real estate owned by Luby’s, corporate Fuddruckers stores, or the company’s Culinary Contract Service business.
Almost all employees at the 32 stores will be offered positions by Gin, which would maintain a workforce that numbers over 1,000. Gin is a member of the family that founded The Flying Food Group, the third largest airline catering company in North America. He is now the co-founder or partner in several companies such as Helios Visions, WorkPlate, and Charming Studios. Luby’s and its financial advisor ran a sales process for the Luby's Cafeteria business, contacting over 235 entities before accepting the best offer, which came from the Gin group.
"We are so pleased to be able to acquire the operation of these Luby's Cafeteria stores, one of the iconic brands in the Texas restaurant market,” Gin said in a statement. “This transaction will allow us to continue serving the many loyal Luby's customers at these locations and to provide long-term employment opportunities for the many associates currently at these locations."
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The agreement is another step in Luby’s plan of liquidation, a process that involves selling assets, paying liabilities, and returning the remaining cash to shareholders. The plan was unveiled in September 2020 after Luby’s couldn’t find a buyer, and it was approved by shareholders in November. The company estimated it would generate between $92 million and $123 million (or about $3–$4 per share of common stock based on 30,752,470 shares) from its liquidation. In November, Luby’s announced it retained JLL, a professional services firm, to assist in the “orderly sale” of its real estate holdings.
A few days earlier, Luby’s revealed it agreed to sell its 92-unit Fuddruckers franchise business to franchisee Black Titan Franchise Systems, a newly formed affiliate of Nicholas Perkins. In the past year, Luby’s completed the transfer of 13 company-owned Fuddruckers to affiliates of Perkins. The brand is also in advanced discussions to complete the sale of a 14th company-owned store as well as establishing a 15th new location with affiliates of Perkins. Following these transactions, Luby’s will have five stand-alone corporate Fuddruckers stores and four combo Fuddruckers operating with Luby’s Cafeterias.
Luby’s anticipates that all but a small amount of the $28.7 million will come from Gin’s assumption of liabilities and an issuance of notes to Luby’s. The restaurant brand said there’s no assurance that it will realize or receive the full value of the agreement, but it doesn’t plan to adjust its estimated liquidation value.
The structure of the transaction will allow Luby’s to sell the real estate under 25 Luby’s Cafeterias to a third party, or parties that can provide Gin operating leases for those properties. For the seven properties that Luby's doesn't own, Gin will assume the leases.
The parties anticipate the transaction will close before the end of the company's current fiscal year.
"I could not be more pleased than to see Calvin Gin, along with many of the existing management team, able to carry on the fine tradition of Luby's brand of food and service in Texas that dates back to 1947,” Gerald Bodzy, Luby’s chairman of the board, said in a statement.
In April, the company reported that it operated 58 Luby’s Cafeterias. It noted that restaurants are “business as usual” as the company progresses through the liquidation plan, which is expected to be completed by June 30, 2022.
Luby’s issues began long before COVID. The company began a strategic review process in September 2019, back when it operated 121 restaurants (78 Luby’s Cafeterias, 42 Fuddruckers, and one Cheeseburger in Paradise) and also served as the franchisor for 103 Fuddruckers units across the U.S., Canada, Mexico, Colombia, and Panama. Back in August 2015 there were 93 Luby’s, 75 Fuddruckers, eight Cheeseburger in Paradise locations, in addition to roughly 100 franchised Fuddruckers stores.
During the early days of COVID, more than half of the corporate staff was furloughed and salaries for non-furloughed employees were cut 50 percent. Later in April, the chain announced it tapped a $10 million Paycheck Protection Program loan and received a delisting warning from the New York Stock Exchange because its stock price fell below $1 per share for 30 straight days.