REPORT FROM THE U.S.—Gaylord Entertainment Company’s executives made good moves last week in its deal with Marriott International and its decision to be treated as a real-estate investment trust, according to an equity analyst for Gabelli & Company.
However, the moves are perhaps not the best possible options from a shareholder’s point of view, said Amit Kapoor, a VP with Gabelli & Company.
“It’s a positive. It’s a step in the right direction,” he said Friday. “It helps monetize … the collection of assets that the company owns.”
Gaylord last week said it intends to sell its brand and management company to Marriott for $210 million and also proposed being treated as a REIT that will focus on acquiring group-oriented hotels in urban and resort markets.
Still, Kapoor said the story comes down to what deal best enhances shareholder value.
“An outright sale of the company would be the best option … Our preferred No. 1 option would have been for it to be sold as one.”
Gabelli & Company is an affiliate of major Gaylord investor Mario Gabelli, the chairman and CEO of Gamco Investors. Gamco is the third largest holder of Gaylord stock, behind TRT Holdings and Columbia Wanger. Gabelli has been rattling Gaylord’s cage of late, advocating for the removal of Gaylord’s poison pill plan, which would allow the company to be taken over by another group.
During a conference call with analysts last week, Gaylord’s Chairman and CEO Colin V. Reed said the company has engaged in ongoing discussions with its major shareholders regarding the future of Gaylord. He did not say whether these shareholders gave the Marriott deal their blessing.
Kapoor declined to say how Gabelli might vote his shares when the deal comes before shareholders later this year.
Unlocking value
While it might not be Gabelli’s best option, Kapoor emphasized the deal still has positives for Gaylord.
“If and when it is consummated, the deal has significant growth opportunities for Gaylord,” Kapoor said. Smaller-box properties will be the most likely to catch Gaylord’s eye, he said.
In a research note Friday, analysts at Raymond James noted several benefits for Gaylord following the deal, including:
- a more efficient tax structure;
- a strong, established platform on which to build its asset base through organic and external channels;
- “significant” property efficiencies and the reduction of overhead; and
- increased revenue opportunities, including through Marriott’s capability to drive large group business and transient business.
And analysts at Goldman Sachs said Thursday in a research note they viewed the deal as “a positive” but noted that after its reorganization as a REIT, Gaylord will still be reliant on only four assets for the time being.
Kapoor said selecting Marriott, “a highly respected brand,” as the management company was a smart move.
He also was complimentary of Gaylord’s top executives. “The current management team led by Colin Reed has a unique skill set and know-how in the (meetings, incentives, conventions and exhibitions) business and conferences,” he said. “They can leverage that to come out as a MICE-led REIT.”
