Proxy Fight Heats Up: Beaver Hollow Wellness Seeks to Turn Around Servotronics

The boardroom battle at Servotronics, Inc. (NYSE: SVT) is intensifying. Beaver Hollow Wellness (BHW), the activist investor holding a 15.2% stake in the company, has filed a definitive proxy statement to oust four incumbent directors and install its own slate of nominees. The proxy, filed May 2, 2025, sets the stage for a pivotal showdown at the June 3 annual meeting, with profound implications for governance, strategy, and shareholder value.

The Case for Change: BHW’s Criticism of Current Leadership

BHW’s campaign hinges on a scathing indictment of Servotronics’ board, which it accuses of years of underperformance, poor capital allocation, and governance failures. Key criticisms include:
- Declining Financial Health: The company’s stock has dropped 36% since 2020, even as aerospace and defense peers outperformed. Operating margins have eroded, and stagnant revenue growth underscores operational mismanagement.
- Value-Destroying Decisions: The sale of Ontario Knife Co., a legacy brand, is labeled a “strategic blunder” that failed to maximize shareholder value.
- Executive Compensation Disconnect: BHW argues that executives received “unjustifiably high” pay packages despite deteriorating results, with 2024 compensation proposals facing a shareholder advisory vote of disapproval.
- Entrenchment Tactics: “Golden Parachute” provisions could trigger multi-million-dollar payouts to directors if shareholders replace them, a move BHW calls a “hostage-taking” ploy to deter change.

The Proxy Battle: Four Proposals to Watch

The proxy statement includes four critical proposals for shareholders to vote on:

1. Director Elections
   BHW’s nominees—turnaround expert Paul L. Snyder III, aerospace veteran Christine R. Marlow, supply chain specialist Michael W. Dolpp, and governance reformer Charles C. Alfiero—aim to replace four incumbent directors (Brent D. Baird, William F. Farrell Jr., Christopher M. Marks, and Evan H. Wax). BHW endorses only Karen L. Howard among the company’s nominees. A “universal proxy” system allows shareholders to mix votes between slates, but BHW urges a “WITHHOLD” vote for the four targeted incumbents.

1. Say-on-Pay Disapproval
   Shareholders will vote on an advisory resolution to reject 2024 executive compensation. BHW argues pay levels are misaligned with results, citing a 12% increase in CEO pay from 2023 to 2024 despite a 9% drop in EBITDA.

2. Annual Say-on-Pay Frequency
   A push to shift from triennial to annual advisory votes on compensation to enhance accountability.

3. Auditor Ratification
   A routine vote to approve Freed Maxick CPAs as auditors.

Why This Matters for Investors

The outcome of this proxy fight could redefine Servotronics’ future. Key considerations:

• Control of the Board: BHW’s 15.2% stake gives it significant influence, but success hinges on convincing other shareholders to withhold votes from the targeted directors. Institutional investors, who collectively hold ~55% of shares, will be pivotal.
• Strategic Alternatives: The board’s ongoing review of strategic alternatives—including a potential sale—is occurring amid operational distress. BHW claims the process lacks transparency and urgency, arguing that new leadership is needed to negotiate favorable terms.
• Governance Reforms: Eliminating golden parachutes and aligning executive pay with performance could unlock value.

Risks and Uncertainties

• Universal Voting Pitfalls: Over-voting (selecting more than five directors) could invalidate ballots, complicating the tally.
• Proxy Contest Costs: Legal and communications expenses could drain resources, distracting from operational improvements.
• Market Reaction: A BHW victory could boost SVT’s stock as investors price in governance improvements, while a defeat might signal continued underperformance.

Conclusion: A Crossroads for Shareholder Value

The stakes are clear: voting FOR BHW’s nominees and AGAINST the current compensation structure could catalyze a governance overhaul and operational turnaround. Conversely, retaining the status quo risks perpetuating mismanagement and subpar returns.

With Servotronics’ stock down 36% since 2020 and trading at just 5.2x trailing EBITDA (vs. industry averages of 8.5x), the case for change is compelling. BHW’s nominees bring expertise in aerospace manufacturing, turnaround strategies, and corporate governance—critical skills for reversing the company’s decline.

Investors should closely watch the June 3 vote. A BHW-led board could reorient Servotronics toward disciplined capital allocation, cost efficiencies, and a transparent strategic review. The alternative—a board clinging to failing strategies—offers little hope for the 1,200 employees and shareholders awaiting a turnaround.

In the end, this is a referendum on whether Servotronics can be salvaged—or if its stakeholders must settle for the status quo. The answer will shape the company’s fate for years to come.