Advisory firm supports Ramius' Luby campaign

The battle for the future of Luby's Inc. intensified Wednesday after shareholder advisory group Proxy Governance Inc. recommended that investors vote to support three of four dissident director candidates nominated by activist hedge fund Ramius Capital Group LLC for the cafeteria operator's 10-person board.
The activist investor group launched a proxy contest on Oct. 17 to nominate four director candidates to Luby's board at the company's annual meeting scheduled for Jan. 15. Proxy Governance also recommended to shareholders that they vote to support an investor proposal seeking to remove Luby's anti-takeover protection, classified board structure.
Luby's, an operator of 130 cafeteria-style restaurants in Texas, on Oct. 31 launched its own campaign, hoping to maintain control of the company's destiny and the support of its institutional investor base.
The restaurant chain on Wednesday issued a proxy to investors lashing out at Ramius' nominees, criticizing them for their limited experience in the restaurant industry or how their background has "little relevance to Luby's from-scratch cooking and casual dining." One nominee, Luby's wrote, is a Ramius director "for hire," has no restaurant industry experience and was recently rejected by shareholders of another publicly traded company.
The activists have taken issue with the company's granting Christopher Pappas, Luby's president, and Harris Pappas, his brother, an exemption from Luby's poison pill, allowing them to own up to 28% of the company's shares, instead of the 15% allowed for other shareholders. While the Pappas brothers argue that increasing their personal financial stake in the company demonstrates their commitment to making sure the company's share price improves, Ramius is concerned that the greater ownership will mean more votes for management-backed directors (and less for them) at the contentious meeting. Ramius has also criticized how, in addition to Luby's, the Pappas brothers operate a private business, which means they have less time to focus on the publicly held Luby's. - Ron Orol