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Tuesday morning (9-25-12), Gaylord Entertainment shareholders approved a $210 million dollar deal to have Marriott International buy the company and take over management of certain Gaylord assets. The vote also sets in motion Gaylord’s plan to covert the company into an REIT, or Real Estate Investment Trust. Shareholders voted at an 85 percent rate in favor of the deal according to The Tennessean.
As part of the SEC filing, Gaylord also revealed plans to change the name of the company to Ryman Hospitality Properties, the “Ryman” being from The Ryman Auditorium; the “Country Music Mother Church” and the first major home of the Grand Ole Opry. The name change also solidifies the company’s hold on The Grand Ole Opry and it’s assets, which includes The Ryman and radio station WSM-AM. According to The Nashville Post, then name change is part of the company’s “plans to have the Ryman brand, along with the Grand Ole Opry and WSM-AM, play a prominent role in their future operations.”
Whether The Grand Ole Opry assets would be part of the deal was called into question when large Gaylord investor Gabelli Funds LLC suggested Gaylord spin off the Opry assets, believing they would thrive better outside of Gaylord’s new structure that will be focused on real estate instead of entertainment, but Gabelli did not hold enough stock to thwart the deal. Gabelli’s Gaylord holdings are near 15%, but it is unclear if he comprised the 15% that opposed the deal. A call to Gabelli by Saving Country Music was not immediately returned. The largest Gaylord stockholder, TRT holdings, also opposed the deal before being bought out by Gaylord to allow the deal to go through.
“Nothing will change at these iconic assets,” said Gaylord CEO Collin Reed last week. “And we look forward to continuing to offer the same level of world-class entertainment that has made them such prominent music institutions.”
Though Marriott International is the new umbrella organization Ryman Hospitality will reside under, Ryman Hospitality will continue to own its assets and manage its resort hotels and the Grand Ole Opry. Marriott will take over management of other Gaylord assets, including Nashville’s General Jackson Showboat and Wildhorse Saloon.
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The sale and ownership change at The Grand Ole Opry represented a unique opportunity for the institution to break free of from corporate control for the first time since 1982, and refocus its assets on the business of music. With the name change, Gaylord’s mark on the Grand Ole Opry now becomes indelible, and the possibility of Opry autonomy unlikely.
On Tuesday morning (9-25-12) Gaylord Entertainment, the owners of The Grand Ole Opry and its various assets will conduct a board meeting to finalize their sale to Marriott International for $210 million and restructure the company into an REIT or Real Estate Investment Trust. Though the deal has been opposed by the two top investors in Gaylord, TRT Holdings and Gabelli Funds, the deal is expected to go through by most experts, but you never know what can happen.
TRT Holdings, Gaylord’s biggest shareholder, had to be bought out make Gaylord’s REIT restructuring possible, and the other big investor Gabelli wants Gaylord to spin off the company’s Grand Ole Opry investments before the restructure, worried these assets will get smothered in a real estate model. With the TRT buyout, Gaylord will likely have the shareholder votes to make the deal go through.
But sitting on the sidelines seems to be the fans of country music and their best interests. Tuesday will be the first time since 1982–when Gaylord purchased The Grand Ole Opry, WSM, and all of it’s various properties–that The Opry will have an opportunity to be free of a larger company’s control, a company that must meet shareholder’s demands, and figure out how to fit an old, historic institution into a modern-day corporate management structure.
Many diehard and purist fans of country music have been saying that The Grand Ole Opry has been mismanaged for years. They feel disenfranchised by the Opry’s recent moves of showcasing more pop, and more younger members of the country music industry. Others cite various causes like the Stonewall Jackson lawsuit that exposed the Opry dilemma of how to handle aging talent, or the campaign to Reinstate Hank to the Opry.
But where is this opposition in the argument for the Opry’s fate that could very well be decided tomorrow? They seem curiously absent. Instead of anger at what has become of arguably country music’s most important institution, there seems to be apathy and resignation to the fact that it is over, that the Opry will never return to its prominence of the past, or to a healthier balance, where both young, up-and-coming talent, as well as aging and traditional country artists share the billing.
But this quite possibly is the moment when the tide has turned. How much influence can the country music public have on the sale of a company? None if they don’t speak up in favor or opposition, but for the first time, they have the business men who make the decisions on their side, echoing the same sentiments Gaylord detractors have for years about Gaylord mismanagement.
The shuttering of The Ryman Auditorium for 20 years would have never happened without the complicit nature of the country music public. The Opry will never fit well in a modern-day corporate structure, and like shareholder Gabelli points out, things could get worse under the new system.
When Gaylord initially purchased the Opry in 1982, there were concerns then about how it would be managed in Gaylord’s complex and diverse portfolio. Marriott showed interest in the Opry in 1982 also, and so did MCA and Anheuser-Busch before passing on the deal, unable to resolve how to take the complex Opry assets and manage them fairly and efficiently. That’s when Gaylord recognized the power of the “Opry” brand and pounced, and since has been poorly managing assets that don’t fit in its structure as a media company, and now as a real estate company.
The folks opposed to the current direction of the Opry should be salivating at this opportunity instead of being resigned to the loss. Maybe it is because of the complexity of the Opry/Gaylord/Marriott deal; they just don’t understand how ripe the moment is. This is the time to be in full throat, to be most vocal. This is the time to be marching on the temple and overturning the tables of the money changers who’ve set up shop in the Opry institution.
Shareholders and bylaws can say whatever they want about who owns the Opry, but the true owners of the Opry will always be the people of country music. Without them attending the shows and listening to the programs, the Opry doesn’t exist. And for the first time in years, there’s allies in the boardroom, parroting similar sentiments to Gaylord’s detractors, not from a heartfelt love from the traditions of country music, but from very cold and concrete analyses of business and management.
At the same time, it is also time for pragmatism. Bad words and calls for bowls of blood have done nothing to re-engage the Grand Ole Opry with the roots of the music, they’ve only typecast the arguments against Gaylord’s ownership regime. The Opry must keep the institution relevant by showcasing younger, popular stars. What must be yearned for is balance, where young, traditional and neo-tradional stars, as well as older stars still putting out relevant material are given equal footing. The Opry needs to re-emerge as the fulcrum in a country music farm system to evaluate and develop emerging talent in an industry that has become creatively stagnant.
And this vote on Tuesday may not be the end of this fight, but only the beginning. As Gaylord restructures into an REIT, the opportunity will linger, if not present itself even more that the Opry assets must be spun off for the health of the Opry, Gaylord, and the new Marriott parent company.
This is not the time to sit back and let Gaylord tighten their reigns on Opry control, it’s time to point out that Edison Research says folks want more classic country, that the Reinstate Hank petition now has over 53,000 signatures. And that what the Opry needs, just like Gabelli says, is autonomy, or an owner who cares.
The Grand Ole Opry is the founding institution of country music, and will always be worth fighting for.
Back on April 30th, Saving Country Music asserted that The Grand Ole Opry was ripe to be spun off and sold from its parent company of Gaylord Entertainment, to the humor of many. Then a month later, lo and behold, Gaylord and The Grand Ole Opry were officially sold to Marriott for $210 million. But apparently the two top shareholders in Gaylord are unhappy with the Marriott deal, with the first one having to be bought out, and the second one Gabelli Funds LLC with a 15% percent stake in Gaylord, specifically asking Gaylord to spin off its Grand Ole Opry assets for the exact reasons Saving Country Music has asserted it should.
As Reuters reports, Gabelli’s concern is that with Gaylord transforming from a broadcasting and entertainment company to a real estate holdings company, Gaylord management will be unable to deal with the specific needs of The Grand Ole Opry. Gabelli said to a letter to Gaylord that under the Marriott deal, The Grand Ole Opry would suffocate and be neglected, but if it was spun off…
…with dedicated and focused management, Opry should better flourish and be an enormous success for shareholders.
Over the last 15 years, Gaylord Entertainment has dramatically shifted their business model from a broadcast and entertainment company, to a hospitality resort-holdings, real estate-based model. Gaylord used to own over 10 local television stations, as well as CMT, TNN, WKY Radio in Oklahoma City, The Daily Oklahoman newspaper, and the massive Acuff-Rose music publishing firm (now Sony ATV). All of these have now been sold off, with The Opry’s WSM the only remaining broadcasting arm of the business.
Today Gaylord’s core business is its 5 resorts and convention centers in Nashville, Orlando, Grapevine, TX (Dallas), National Harbor, MD, and Denver (scheduled to open 2014), as well as other real estate assets. If you take away the real estate and tourist component from The Grand Ole Opry, the Opry franchise sticks out like a sore thumb in the current Gaylord Entertainment business structure.
As part of the sale to Marriott, Gaylord wants to officially restructure into an REIT, or Real Estate Investment Trust, to unlock certain tax incentives, but both Gabelli, and the previous #1 investor in Gaylord, TRT Holdings, think that Gaylord negotiated a bad deal, and that restructuring into an REIT is a bad idea, especially because of Gaylord’s Grand Ole Opry assets. To satiate TRT holds, which owed a 21% stake in the company, Gaylord bought back 5 million of its shares for $185 million in July, making Gabelli now Gaylord’s #1 investor. Now that Gabelli is opposing the deal, and specifically because includes the Grand Ole Opry asset, the possibly the Grand Ole Opry will be spun off from Gaylord has never been greater.
The sale of Gaylord to Marriott comes up for a shareholder vote this week, where the fate of Gaylord’s future as an REIT and the status of The Grand Ole Opry will be big topics.
Why Is It Important Who Owns The Grand Ole Opry?
As Gabelli explains, if the Grand Ole Opry is buried in a corporate structure managed by people that are not aware or not used to managing a historic institution like the Opry, the likelihood is that it will not reach it’s fullest potential, as an institution or as an investment. If The Opry assets were either owned autonomously (if The Opry owned itself), or by another company that is better suited to understanding the specific needs of the Opry, it is more likely to earn a greater return for investors.
Hypothetically this would also be a better outcome for country music fans who have been frustrated by the current management and direction of The Opry. As it stands, many Opry decision are run through a corporate structure designed to manage hotels and real estate, not stage performers and country music personalities. Hypothetically, Gaylord coming under the Marriott umbrella would only make this worse, and The Opry being spun off could only make it better.
As first theorized here in late April, Gaylord Entertainment, the parent company of the iconic Grand Ole Opry and radio station WSM, has been sold to Marriott International for $210 million. On May 16th, the company allowed a “poison pill” to expire, making the possibility of a sale a reality. According to a press release by Gaylord about the sale, the company will retain its Grand Ole Opry holdings for now, however will be reorganizing into an REIT, or Real Estate Investment Trust, meaning Gaylord is no longer an autonomous, shareholder-owned entertainment company, but a real-estate holding, and a subsidiary of the Marriott hotel chain.
The theory behind the sale and restructuring of Gaylord is to better manage the current Gaylord business that has gone from a company that predominantly owned radio stations, newspapers, and entertainment outlets, to owning 5 huge hotel properties in Nashville, Orlando, Grapevine, TX (Dallas), National Harbor, MD, and Denver (scheduled to open 2014). By restructuring into an REIT, Gaylord will receive certain tax benefits, and will be able to run more efficiently in a larger hotel corporate structure.
“We are thrilled to be aligning with Marriott, an organization that consistently receives the industry’s highest praise among group customers and meeting planners.” says Gaylord CEO Colin Reed. “The REIT structure allows us to benefit from a more efficient tax structure, and establish a platform to grow our distinct asset base through organic growth of our existing portfolio and, in time, through strategic acquisitions. Moreover, we believe that by working with Marriott International, our shareholders will benefit from significant property efficiencies and corporate overhead reductions, as well as revenue synergies which include Marriott’s ability to attract and market to large group customers.
The press release from Gaylord about the sale expressly states the Grand Ole Opry and its real estate assets will remain assets of Gaylord.
Gaylord will continue to own and operate the Grand Ole Opry, Ryman Auditorium and other attractions as taxable REIT subsidiaries. Nothing will change at these iconic assets of the Nashville community, and Gaylord is fully committed to maintaining the legacy of these historic attractions.
However as Gaylord restructures into a real estate holding company over the coming months, an Opry sale could still be a possibility, if not a greater probably in the long term as the company continues to move away from the entertainment business.
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Barring a Grand Ole Opry sale during restructuring, this all could be bad news for friends of the Grand Ole Opry hoping for a return to the institution’s roots, or maintaining the roots that have been left in tact during Gaylord’s management regime. Becoming part of an even larger corporate structure, especially one not focused on entertainment, means even more focus of efficiencies and revenue, and less understanding of the Grand Ole Opry’s unique importance and place in the legacy of country music within the corporate structure The Opry finds itself in. The Opry’s business model was conceived nearly 85 years ago, and its viability depends on retaining certain values and traditions from that original structure that many times clash with today’s for-profit environment.
When Gaylord and Marriott talk about “significant property efficiencies and corporate overhead reductions, as well as revenue synergies…” this means The Grand Ole Opry could be be susceptible to even more rigorous oversight and revenue goals that do not reflect the institution’s original or core values. Even though Gaylord retains ownership in name of The Opry and its hotels in the larger Marriott structure, what Gaylord is selling is the rights for Marriott to manage Gaylord assets, including The Opry. And as Gaylord says in in the press release, it is not focused on entertainment as it restructures to an REIT, but is “focused primarily on group-oriented destination hotels in urban and resort markets.”
Furthermore for communities like Nashville, this restructuring will mean job losses as Gaylord trims the fat, and eliminates redundant positions Marriott can already manage. The Marriott press release from CEO Arne Sorenson mentions, “We will continue to focus on building careers for Gaylord’s “STARS”, whom we will welcome to the Marriott family,” but positions will be cut as the two companies merge and attempt to benefit from business synergy. This move also has specific effects on Gaylord’s Denver, CO property still under construction. According to Gaylord, the scope of this property will be scaled down during this process, two weeks after an $81.4 million tax incentive was approved by local officials for the already controversial project.
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