DEFA14A: PENN Entertainment Reaffirms Director Nominees Amidst ISS Report and Shareholder Meeting Dispute

PENN Entertainment, Inc. responds to an ISS report, reiterating its recommendation for Johnny Hartnett and Carlos Ruisanchez for the two available director seats at the upcoming Annual Meeting on June 17, 2025, while criticizing HG Vora's rejected nominee, William Clifford.

Summary

• PENN Entertainment issued a press release on June 6, 2025, responding to a report by Institutional Shareholder Services (ISS) concerning its 2025 Annual Meeting of Shareholders scheduled for June 17, 2025.
• Both PENN and activist investor HG Vora are recommending the same two highly-qualified candidates, Johnny Hartnett and Carlos Ruisanchez, for the two available director seats.
• ISS acknowledged PENN's board for its open-mindedness in evaluating HG Vora's director candidates and its willingness to accept two of them as its own nominees.
• PENN encourages all shareholders to vote for Messrs. Hartnett and Ruisanchez, noting that if elected, 75% of PENN's directors will have joined the Board since 2019.
• The company criticized ISS's assessment of William Clifford's candidacy, stating that as PENN's CFO in 2013, Mr. Clifford opposed key initiatives that later led to "meaningful margin improvement" under the P30 program after his departure.
• PENN further stated that Mr. Clifford demonstrated "antiquated views" and a "posture of resistance to exploring value-generating solutions" during his interviews with the Nominating and Corporate Governance Committee.
• PENN disclosed that HG Vora rejected multiple resolution attempts and that HG Vora's violation of institutional waivers by state gaming regulators prohibited PENN from allowing HG Vora to influence the Company's governance beyond nominee evaluation.
• The Board and management team reiterated their commitment to creating shareholder value and ensuring the Board is optimally composed to oversee the Company's strategic plan.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it highlights the alignment on two director nominees and the company's strategic strengths, it also contains strong negative commentary regarding a dissident nominee (William Clifford) and the activist investor (HG Vora), indicating an ongoing dispute and defensive posture. The overall tone is confident in its own strategy but defensive against external influence.

Positives

• PENN and HG Vora are recommending the same two highly-qualified candidates, Johnny Hartnett and Carlos Ruisanchez, for the two available director seats, indicating some alignment on board composition.
• ISS recognized PENN's board for giving serious consideration to all three dissident nominees and being open to accepting two as its own, suggesting a degree of responsiveness to shareholder input.
• Following the Annual Meeting, 75% of PENN's directors will have joined the Board since 2019, indicating a significant refreshment of the board.
• PENN's management and Board are committed to creating value for all shareholders and executing a strategic plan.
• PENN is North America's leading provider of integrated entertainment, sports content, and casino gaming experiences, operating in 28 jurisdictions with a diversified portfolio.
• The company leverages its partnership with ESPN and ownership of theScore for a differentiated strategy to expand its footprint and grow its customer ecosystem.
• PENN has a proprietary state-of-the-art, fully integrated digital sports and iCasino betting platform and an in-house iCasino content studio (PENN Game Studios).
• The PENN Play customer loyalty program boasts over 32 million members, indicating a strong customer base.

Negatives

• PENN explicitly states that the ISS report "fails to reflect a realistic view of William Clifford's candidacy," indicating a disagreement with ISS's assessment.
• William Clifford, a nominee from HG Vora, is criticized for advocating against "key initiatives" as CFO in 2013, which were later implemented for "meaningful margin improvement" after his departure.
• Mr. Clifford is also accused of demonstrating "antiquated views of a rapidly changing industry" and "the same posture of resistance to exploring value-generating solutions" during interviews.
• HG Vora rejected multiple resolution attempts from PENN, indicating a breakdown in negotiations.
• HG Vora's violation of institutional waivers by multiple state gaming regulators "expressly prohibited" PENN from allowing HG Vora to influence the Company's governance beyond nominee evaluation, highlighting regulatory issues with the activist investor.

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 Amended Credit Facilities or other sources of capital to enable the company to service its indebtedness, make anticipated capital expenditures, or pay off or refinance indebtedness prior to maturity.
• The impact of indemnification obligations under the Barstool SPA.
• The ability to achieve 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, and the costs and obligations of such terms if agreed.
• The outcome of any legal proceedings that may be instituted against the Company, ESPN, or their respective directors, officers, or employees.
• The ability of the Company or ESPN 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.
• Adverse outcomes of litigation involving the Company, including litigation in connection with the 2025 annual meeting of shareholders.
• The ability to maintain gaming licenses and concessions and comply with applicable gaming law, changes in current laws, regulations, rules, or other industry standards.

Future Outlook

The company expects future results of operations and financial condition, including projections of revenue, Adjusted EBITDA, and Adjusted EBITDAR, based on product and technology investments. It anticipates customer growth and success in competitive markets for retail/mobile/online sportsbooks, iCasino, social gaming, and retail operations. PENN plans to develop and launch Interactive segment products in new jurisdictions and enhance existing ones, including ESPN BET and theScore BET, leveraging its proprietary platforms. The company expects benefits from the Sportsbook Agreement with ESPN and continued growth and monetization of its media business, aiming to expand gaming operations through disciplined capital expenditure, strategic acquisitions, and new property development.

Management Comments

• "The ISS report confirms that two director seats are up for election at the 2025 Annual Meeting and that PENN and HG Vora have nominated and are recommending the same two highly-qualified candidates Johnny Hartnett and Carlos Ruisanchez."
• "PENN encourages all shareholders to vote for Messrs. Hartnett and Ruisanchez for election and looks forward to welcoming them to the Board."
• "We remind shareholders that, during his time as PENN’s CFO, Mr. Clifford advocated against key initiatives that were critical to succeeding in a competitive market."
• "Further, during his interviews with PENN’s Nominating and Corporate Governance Committee, Mr. Clifford demonstrated antiquated views of a rapidly changing industry, and the same posture of resistance to exploring value-generating solutions, which we believe would hinder constructive decision-making."
• "PENN attempted multiple resolutions with HG Vora, but all of our resolution attempts were rejected."
• "Given HG Vora’s violation of its institutional waivers by multiple state gaming regulators, our ability to allow HG Vora to influence the governance of the Company beyond the evaluation of the nominees was expressly prohibited."
• "We want to assure shareholders that we understand and share their focus on ensuring that PENN’s Board of Directors is optimally comprised to oversee the Company’s execution on a strategic plan to drive shareholder value."
• "The Board and management team remain committed to creating value for all shareholders and will continue to take actions in support of that objective."

Industry Context

PENN Entertainment operates in the highly competitive North American integrated entertainment, sports content, and casino gaming industry. The document highlights the rapid changes in the industry, particularly concerning digital sports betting and iCasino offerings, and the importance of strategic partnerships (like with ESPN) and proprietary technology (like PENN Game Studios and its digital betting platform) to expand market footprint and customer ecosystems. The mention of "antiquated views" regarding the industry suggests a need for adaptability and innovation in this evolving sector.

Management Changes

Corporate Governance

Legal Proceedings

• The company lists "adverse outcomes of litigation involving the Company, including litigation in connection with our 2025 annual meeting of shareholders" as a risk factor, indicating potential or ongoing legal disputes related to the proxy contest.

Stakeholder Impact

• **Shareholders**: The document directly addresses shareholders regarding voting for director nominees, emphasizing the company's commitment to driving shareholder value and ensuring an optimally comprised Board. The proxy contest and board composition directly impact shareholder representation and oversight.
• **Employees**: No direct impact mentioned, but successful execution of strategic plans and growth could benefit employees through job security and opportunities.
• **Customers**: The company's focus on expanding its footprint, growing its customer ecosystem, and enhancing digital products (ESPN BET, theScore BET) aims to improve offerings and experiences for customers.
• **Creditors**: The ability to obtain financing and service indebtedness is mentioned as a risk, which could indirectly impact creditors.

Next Steps

• Shareholders are encouraged to vote for Johnny Hartnett and Carlos Ruisanchez for election at the Annual Meeting on June 17, 2025.
• PENN looks forward to welcoming Messrs. Hartnett and Ruisanchez to the Board following their election.
• The Board and management team will continue to take actions to create value for all shareholders.
• The company plans to expand gaming operations through disciplined capital expenditure, strategic acquisitions, and the development of new gaming properties.
• Further development and enhancements of ESPN BET and theScore BET on proprietary player account management system and risk and trading platforms are anticipated.

Key Dates

Keywords

PENN Entertainment, SEC filing, DEFA14A, proxy statement, annual meeting, director nominations, corporate governance, ISS report, HG Vora, Johnny Hartnett, Carlos Ruisanchez, William Clifford, casino gaming, sports betting, iCasino, ESPN BET, theScore BET, shareholder value, risk management