DEFA14A: Glass Lewis Recommends Shareholders Vote FOR PENN Entertainment's Director Nominees

Leading independent proxy advisory firm Glass Lewis has recommended PENN Entertainment shareholders vote FOR the company's two director nominees, Johnny Hartnett and Carlos Ruisanchez, for the upcoming 2025 Annual Meeting.

Summary

• Glass Lewis, a leading independent proxy advisory firm, has recommended that shareholders vote FOR PENN Entertainment's two director nominees, Johnny Hartnett and Carlos Ruisanchez, on the Company's WHITE proxy card.
• The recommendation pertains to the Company's 2025 Annual Meeting of Shareholders, scheduled for June 17, 2025.
• Glass Lewis noted that the addition of Hartnett and Ruisanchez is likely to enhance board oversight of PENN's capital allocation and digital strategy.
• The report clarified that there are two Board seats available for election, and HG Vora's third nominee, William Clifford, is not eligible.
• Glass Lewis found no sufficient evidence that PENN's board acted in bad faith or with the primary purpose of entrenchment regarding its review of HG Vora's nominees or its decision to reduce board size.
• PENN stated it decided not to solicit proxies for the PENN White Card over the HG Vora Gold Card, as votes for Messrs. Hartnett and Ruisanchez on either card will be counted.
• Following these elections, 75% of PENN's directors will have joined the Board since 2019, indicating significant board refreshment.

Sentiment

Score: 7

Explanation: The document conveys a positive sentiment regarding corporate governance and shareholder relations, primarily due to the favorable recommendation from Glass Lewis, which validates the company's board refreshment efforts and decisions regarding director nominees. The acknowledgment of regulatory challenges and the board's thorough review adds to the credibility, suggesting a stable outlook for the upcoming shareholder meeting.

Positives

• Leading independent proxy advisory firm Glass Lewis recommended shareholders vote FOR PENN's two director nominees, Johnny Hartnett and Carlos Ruisanchez.
• Glass Lewis believes the addition of Hartnett and Ruisanchez will likely enhance board oversight of PENN's capital allocation and digital strategy.
• Glass Lewis found no sufficient evidence that PENN's board acted in bad faith or with the primary purpose of entrenchment regarding its review of HG Vora's nominees or its board size decision.
• The Company's board has undergone significant refreshment, with 75% of directors joining since 2019 following these elections, demonstrating responsiveness to shareholder feedback.
• PENN's decision not to solicit proxies for the White Card over the Gold Card simplifies the voting process for shareholders, as votes for the recommended nominees will be counted regardless of the card used.

Negatives

• HG Vora's third nominee, William Clifford, is not eligible for election at this meeting due to the board's recent decision to reduce its size, a decision supported by Glass Lewis.
• Regulatory constraints in the highly regulated gaming industry delayed HG Vora's ability to submit nominations, highlighting potential operational hurdles in a complex regulatory environment.

Risks

• The effects of economic and market conditions, including global supply chain disruptions, price inflation, changes in interest rates, economic downturns, changes in trade policies, and geopolitical and regulatory uncertainty.
• Competition with other entertainment, sports content, and gaming experiences.
• The timing, cost, and expected impact of product and technology investments.
• Risks relating to operations, permits, licenses, financings, approvals, and other contingencies in connection with growth in new or existing jurisdictions.
• The ability to successfully acquire and integrate new properties and operations and achieve expected synergies from acquisitions.
• The availability of future borrowings under credit facilities or other sources of capital to service indebtedness, make anticipated capital expenditures, or pay off/refinance indebtedness.
• The impact of indemnification obligations under the Barstool SPA.
• The ability to achieve the anticipated financial returns from the Sportsbook Agreement with ESPN, including due to fees, costs, taxes, or circumstances beyond the Company's or ESPN's control.
• The occurrence of any event, change, or other circumstances that could give rise to the right of one or both of the Company and ESPN to terminate the Sportsbook Agreement.
• The ability of the Company and ESPN to agree to extend the initial 10-year term of the Sportsbook Agreement on mutually satisfactory terms, if at all.
• The outcome of any legal proceedings that may be instituted against the Company, ESPN, or their respective directors, officers, or employees, including litigation in connection with the 2025 annual meeting of shareholders.
• The ability to retain and hire key personnel.
• The impact of new or changes in current laws, regulations, rules, or other industry standards.
• The impact of activist shareholders.
• The ability to maintain gaming licenses and concessions and comply with applicable gaming law.

Future Outlook

PENN Entertainment anticipates enhancing board oversight of capital allocation and digital strategy with the election of its recommended nominees. The company is committed to prioritizing shareholder interests and advancing its strategy to deliver long-term value through a strengthened Board. Future plans include continued growth and monetization of its media business, expansion of gaming operations via disciplined capital expenditure, strategic acquisitions, and development of new properties, and leveraging its ESPN partnership and theScore ownership to expand its footprint and grow its customer ecosystem.

Management Comments

• "We are pleased Glass Lewis recognizes the Boards thorough review of all three of HG Voras nominees, our responsiveness to shareholder feedback regarding refreshment and the rigorous regulatory oversight of the gaming industry, in particular the restrictions imposed related to our engagement with HG Vora."
• "Glass Lewis also acknowledges the strength and depth of the skills and experience our directors bring, in addition to our significant refreshment efforts."
• "As we communicated to shareholders on May 19, 2025, we made the decision not to solicit proxies for the PENN White Card over the HG Vora Gold Card given that votes for Messrs. Hartnett and Ruisanchez on either card will be counted at the Annual Meeting."
• "The PENN Board and management team remain committed to prioritizing the best interests of all shareholders, and look forward to further advancing PENNs strategy to deliver long-term value with a strengthened Board following the Annual Meeting."

Industry Context

PENN Entertainment operates in the highly regulated North American gaming industry, spanning 28 jurisdictions with a diversified portfolio including casinos, racetracks, online sports betting, and iCasino offerings. The company's strategy is centered on leveraging its partnership with ESPN and ownership of theScore to expand its footprint and customer ecosystem through organic cross-sell opportunities. The regulatory environment significantly influences corporate governance, including the stringent multi-jurisdictional licensing reviews required for director nominees, as highlighted by the delays faced by HG Vora's nominations.

Management Changes

Corporate Governance

Legal Proceedings

• The document identifies a risk of adverse outcomes from litigation involving the Company, including specifically mentioning litigation in connection with the 2025 annual meeting of shareholders, as a factor that could significantly affect future financial results and business.

Stakeholder Impact

• Shareholders: Directly impacted by the proxy advisory firm's recommendation for director elections, which provides guidance for their voting decisions. The outcome of the vote and board composition could influence long-term value creation and corporate strategy.
• Company Management and Board: The favorable Glass Lewis recommendation validates their corporate governance decisions, including board refreshment and the handling of dissident nominees, potentially strengthening their position.
• Customers: Potential for improved digital offerings and gaming experiences as the strengthened board aims to enhance oversight of capital allocation and digital strategy.
• Regulatory Authorities: The document highlights the rigorous regulatory oversight in the gaming industry, acknowledging its impact on processes like director nominations.

Next Steps

• The 2025 Annual Meeting of Shareholders will be held on June 17, 2025, where shareholders will vote on director nominees.
• Following the Annual Meeting, the PENN Board and management team will continue to advance PENN's strategy to deliver long-term value with a strengthened Board.
• Ongoing development and launch of Interactive segment products in new jurisdictions and enhancements to existing products, including ESPN BET and theScore BET.
• Expansion of gaming operations through the implementation and execution of a disciplined capital expenditure program at existing properties, pursuit of strategic acquisitions and investments, and development of new gaming properties.

Key Dates

Recommendation

Keywords

PENN Entertainment, Glass Lewis, Proxy Statement, Director Nominees, Annual Meeting, Corporate Governance, Gaming Industry, Casino, Sports Betting, ESPN BET, Shareholder Vote, Board Refreshment, Nasdaq: PENN