Is Gaylord now a takeover target?

Gaylord's Opryland property in Nashville
Gaylord’s Opryland property in Nashville

An interesting report by Bloomberg on Wednesday speculated that Gaylord Entertainment Co., Nashville, Tennessee, could now be a takeover target after shareholders voted last week to let a poison pill that has guarded against unwanted offers expire.

After two difficult years of business, the publically traded company, which operates four large convention center hotels in the U.S., has been trading well below its value after its shares fell 33% last year. Analysts suggest it is valued at a 28% discount to hotel owners.

Gaylord could fetch at least US$45 a share in a takeover, a 37% premium to its average price during the past 20 days, according to BGB Securities and JMP Securities.

Analysts also estimate that Gaylord’s net income will more than triple this year to US$36 million as business conditions improve and the company draws more leisure visitors. EBITDA is projected to climb to new records each year through 2014.

With Gaylord’s well-regarded, unique assets creating a strong profit growth story, the Bloomberg report suggested that the US$1.69 billion company might attract suitors such as TRT Holdings, owner of the Omni hotel brand.

In fact, TRT’s billionare Chairman Robert Rowling recently increased his position in Gaylord to 22%. “The aim would be to realize synergies between Omni and Gaylord,” Nikhil Bhalla, an analyst at FBR & Co., told Bloomberg. “You’ll have a larger portfolio of hotels and you can trim down the corporate overheads to manage both.”

Other companies mentioned as potential suitors include Host Hotels or other private equity firms.

With the company planning a fifth resort and convention center outside of Denver, a takeover by a private-equity firm or large hotel company would help Gaylord fund the project, which will cost US$800 million, and other developments in the future, according to BGB Securities.

“Gaylord has tremendous opportunities to grow,” Sam Yake, an analyst at BGB Securities in Arlington, Virginia, told Bloomberg. “Shareholders think that the stock’s worth a heck of a lot more than it’s currently trading at and I think that’s what they want to get at. Management knows that they need to do something.”

Gaylord’s CEO Colin Reed said on a May 8 conference call that the past six months have been spent looking at all options to unlock value. He said the process was “nearing completion,” without giving a timeline or providing further details.