Amid the ongoing public dispute between PENN Entertainment and activist investor HG Vora, the omnichannel gambling operator has elected two of the shareholder’s three nominees for director to its board.
At PENN’s Annual Meeting of Shareholders on Tuesday, June 17, the ESPN Bet and Hollywood Casino operator confirmed independent director nominees Johnny Hartnett and Carlos Ruisanchez as new board members.
PENN disclosed on June 9 that independent proxy advisory firm Glass Lewis backed the double appointment, suggesting that the additions are “likely to enhance board oversight of PENN’s capital allocation and digital strategy.”
The fact that PENN had only opened up two seats on the board for election, rather than the three HG Vora wanted, was the trigger for a public spat that has included multiple public statements from each side and a website dedicated to highlighting alleged PENN failures, and has spilled over into the courts.
As a broader issue, HG Vora has taken issue with the leadership of PENN CEO Jay Snowden and other executives, accusing the company of “value-destructive” operational decisions, such as an increased focus on digital gaming through ventures such as ESPN Bet, theScore Bet in Canada and the short-lived Barstool Sports experiment.
In response, PENN has reiterated that its PENN Interactive arm has posted strong growth and is primed for future success.
Two out of three ain’t bad?
HG Vora, which is PENN’s third-largest shareholder, has been fighting to get three new members elected to PENN’s board. PENN nominated Hartnett and Ruisanchez but reduced the size of its board to eight members.
The third independent director nominee put forth by HG Vora was William Clifford. In a statement on Tuesday, HG Vora asserted that Clifford was supported by dozens of institutional investors and actively managed funds and received a majority of votes cast in the election.
“PENN’s shareholders have voted overwhelmingly for genuine change, including for the election of William Clifford to the baord,” said HG Vora founder Parag Vora. “There can be no mistake about the mandate from PENN’s shareholders that the status quo is simply unacceptable. We are grateful for the strong support the three independent nominees have each received from shareholders and are confident that Johnny and Carlos will work constructively with their fellow directors to drive shareholder value.”
HG Vora urged PENN shareholders to vote on its own Gold proxy card, which carried the names of all three board nominees. The investor firm noted that 55% of all votes cast in the PENN election were submitted on its card. PENN communicated to shareholders back on May 19 that it would not solicit proxies for its own White card over the HG Vora Gold card, given that votes for Hartnett and Ruisanchez on either card would count.
PENN issues latest rebuttal
In its June 9 statement, PENN quoted Glass Lewis as noting that Clifford’s nomination by HG Vora was not substantiated.
“Based on our review, we believe certain aspects of Clifford’s profile may overlap with existing or anticipated members of the board…” said Glass Lewis, as quoted by PENN. “The board’s assertion that his background is not sufficiently differentiated – and its unanimous decision not to support him despite backing two other dissident nominees – raises questions as to whether he would bring distinctive value at this time.
“We do not find sufficient evidence that the board acted in bad faith or with the primary purpose of entrenchment,” added Glass Lewis. “The Company did evaluate all three HG Vora nominees, including through interviews, and provided detailed rationale for its decisions.”
HG Vora has gone as far as to sue PENN in the Eastern Pennsylvania District Court, claiming PENN sought to evade regulatory oversight and violated law by removing one of the three seats without notifying shareholders. HG Vora has filed a motion to expedite the trial, while PENN has submitted a request to stay the case.
