Penn Adds Three Directors, Ends Proxy Fight with HG Vora

• Regional casino operator is adding three directors
• That move increases the size of the board to 11 from eight
• It also ends a proxy battle with HG Vora

Penn Entertainment (NASDAQ: PENN) today announced the appointment of three new directors, expanding the size of its board to 11 from eight while ending a proxy fight with hedge fund HG Vora in the process.

The regional casino operator is adding Heather Ace, Jeffrey Fox, and Fabio Schiavolin to its board, effective immediately while reaching a cooperation agreement with Vora that ends a lengthy rift between the two sides. The hedge fund and Penn also reached a cooperation agreement that contains various provisions limiting the investor’s activism.

“Pursuant to the Cooperation Agreement, HG Vora has agreed to abide by certain customary standstill restrictions, and the Company and HG Vora have also agreed to certain non-disparagement obligations, in each case which remain in effect until the forty-five days prior to the deadline for the submission of shareholder nominations of directors and business proposals for the Company’s 2028 Annual Meeting of Shareholders,” aacording to a Form 8-K filed with the Securities and Exchange Commission (SEC). “The Cooperation Agreement also contains certain customary voting commitments by HG Vora and other provisions.”

Schiavolin Is the Director to Watch

Last year, Vora pushed to add three directors to Penn’s board, ultimately taking the company to court alleging in improperly reduced the size of its board to avoid Vora-nominated William Clifford. Although Clifford had ties to Penn, the operator balked at giving him a board seat, calling his views on the industry “antiquated” while saying his reluctance to consider change could harm the company.

It’s not clear if Schiavolin is a “compensatory” selection or if Vora was active in his appointment, but the situation is one to monitor because he’s up for reelection to the board later this year and because he’s the only one of three new directors with direct gaming industry experience.

The Cooperation Agreement further provides that the Company will use its reasonable best efforts to cause the election of Mr. Schiavolin at the Company’s 2026 Annual Meeting of Shareholders, including by listing Mr. Schiavolin in the proxy card prepared, filed and delivered in connection with such meeting and recommending that the Company’s shareholders vote in favor of the election of Mr. Schiavolin and otherwise supporting him for election in a manner no less rigorous and favorable than the manner in which the Company supports its other nominees in the aggregate,” according to the regulatory filing.

Schiavolin founded a company known as Cogetech, which merged with Snaitech in 2015. He’d go on to become chief executive officer of Snaitech and oversaw that company’s merger with Playtech. Playtech sold Snaitech to Flutter Entertainment (NYSE: FLUT) two years ago.

Some Compensation for Vora

Vora began amassing a position in Penn in the second quarter of 2022 — one that grew to 18.5% by the end of 2023 when including derivatives. The hedge fund later reduced that stake to avoid obtaining gaming permits in the various states in which Penn operates.

Over the past three years, shares of Penn tumbled 62.14%, implying Vora likely lost money on the investment, but it is receiving some compensation.

Under the terms of the cooperation agreement, the gaming company will reimburse the hedge fund for the expenses it incurred during its activist campaign.