Luby’s, Inc. (LUB) Board Announces Plan of Liquidation & Dissolution, While Shares Rise Above 110% on Tuesday

Luby’s shareholders can receive $3 to $4 per share in liquidation, as the company awaits stockholder’s approval.

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Luby’s, Inc. (LUB) has reported having agreed upon the plan of liquidation and dissolution. The Board of Directors of the company after in-depth analysis and searching for strategic alternatives have decided to liquidate the company’s assets.

After the announcement of the liquidation of the firm, Luby’s stock skyrocketed to triple figures with closing at $2.20 up by almost 111% on Tuesday. However, LUB has started trading on a negative side today with dropping up to 8.33% at 10:09 A.M. EDT. At the time of writing, LUB was trading at $2.0350.

With Luby’s board decision to liquidate firms’ assets, the company is looking forward to sale its assets and distribute the net proceeds to the stockholders, following the process the company will be dissolved.

The recent announcement is followed by the prior announcement of Luby’s seeking the sale of its assets, reported on June 3. The only step that remains now is to attain stockholder’s approval in connection with these matters.

The COVID-19 pandemic seems to have crushed the hopes of the firm. The company which includes Luby’s, Fuddruckers, and Cheeseburger in Paradise, has severely been affected by the epidemic causing a serious economic crisis. 

The company highlighted that the assets that would be included in the proposed sale are Luby’s Cafeterias, Fuddruckers, real estate, and Luby’s culinary contract services business. The company anticipates attaining net proceeds between $92 million to $123 million from the liquidation of the firm’s assets.

Luby’s, Inc. (LUB) values its total assets to be worth $104 million, whereas, it holds a long-term debt of $57.3 million and obligations on operating leases of $22.7 million. As per the assets worth, the shareholders would receive $3 and $4 per share of common stock upon liquidation, as the estimates are based on 30,752,470 common stock shares outstanding as of September 2, 2020.

The company intends to complete the aggregate payments in one or more distributions. Whereas, the timing or amount of these distributions can not yet be finalized or predicted due to uncertain circumstances of the market. The President and CEO of Luby’s commented:

“We believe that moving forward with a Plan of Liquidation will maximize value for our stockholders, while also preserving the flexibility to pursue a sale of the Company should a compelling offer that delivers superior value be made.”

Luby’s, Inc. (LUB) board has decided that after the complete approval of the plan by stockholders, the company will sell its assets if it finds a better option that will provide superior value to its stockholders compared to the estimates.

The financial advisor for Luby’s liquidation and dissolution plan was Duff & Phelps Securities, LLC, and Gibson, Dunn & Crutcher LLP acted as legal advisor to the Special Committee in connection with the Committee’s strategic review.