HG Vora Capital Management has filed a definitive proxy statement against Penn Entertainment as it steps up its fight to gain three seats on the company’s board.
The key Penn shareholder, which owns a 4.8 per cent stake in the land-based and online gaming operator, has taken issue with Penn’s decision to reduce the number of board seats up for election at its AGM from three to two.
Penn has indicated that it will nominate Johnny Hartnett and Carlos Ruisanchez, but the nomination of William Clifford is in doubt.
HG Vora initially stated it would nominate all three candidates.
After filing a complaint against Penn in the United States District Court for the Eastern District of Pennsylvania over the matter, HG Vora has now stepped up its fight against the decision – with wide-ranging criticism of Penn’s management and business decisions aimed at getting Clifford’s nomination approved.
“We believe Penn’s directors do not want Mr. Clifford in the boardroom to scrutinise their deal-making or question their strategy or leadership — even though that is exactly what is needed,” a letter to Penn shareholders said.
HG Vora noted Clifford’s more than 30 years’ experience in the gaming industry, including as chief financial officer of Penn and Gaming and Leisure Properties.
“We believe Mr. Clifford’s deep knowledge of Penn’s operations and expertise in M&A in the gaming industry make him particularly well-suited to challenge the board and management to address its disappointing capital allocation track record and improve performance,” the letter said.
“In our view, that is precisely why Penn’s directors reduced the number of board seats available at the Annual Meeting.”
The letter said Penn’s stock has “underperformed” compared to its peers over the last 10 years due to an “unsuccessful strategic shift that has been plagued by value-destructive deal-making, reckless capital allocation and poor execution.”
HG Vora said that Penn CEO and president Jay Snowden and board chair David Handler have been pursuing a “misguided transformation from a best-in-class regional casino operator to a sports, media and technology conglomerate. Unfortunately, this transformation has been characterised by massively overpaying for acquisitions and poor execution.”
“Under the oversight of the board and Mr. Handler — who purports to be an expert in gaming and technology M&A – Penn has executed a string of transactions that, in our view, stand among the worst in the industry’s history,” the letter added.
“Penn paid more than $2bn for Score Media and Gaming, a small Canadian company that was generating less than $25m in annual revenue, and more than $500m for Barstool Sports, whose controversial brand and outspoken founder [Dave Portnoy] reportedly threatened Penn’s relationships with its gaming regulators, putting the entire Penn franchise at risk.
“Penn has also committed to paying Disney more than $2bn for the right to the ESPN Bet trademark for 10 years, a sum that Disney’s CEO noted was substantially more than other suitors were willing to pay.”
“We believe that fair elections are the cornerstone of corporate democracy. We have therefore commenced litigation against the company to ensure that shareholders have the opportunity to elect all three HG Vora-nominated candidates at the Annual Meeting,” the letter concluded.
