What escalated the potential sale of The Opry from a theory to a very real possibility was a procedural vote earlier this week by Gaylord shareholders to let what’s called a “poison pill” in the company’s bylaws expire, making a takeover of Gaylord by another entity a real possibility, if not inviting it to help bolster Gaylord’s sagging stock value that dropped 33% last year. Gaylord has posted two straight years of losses, and is potentially looking to raise capitol to continue to expand its hotel and resort business.
How The Grand Ole Opry could factor into a potential sale is how it could be spun off and sold separately from Gaylord’s resort holdings. 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). Many of Gaylord’s big shareholders are holding companies that own other hotel chains, including its biggest shareholder, TRT Holdings, which owns the Omni and Host hotel chains.
As Saving Country Music explained when asking if the Country Music Hall of Fame should take over The Opry, “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.”
If Gaylord is sold to a larger hotel holding company or otherwise forced to split its assets, this makes it even less likely that Gaylord will keep control of The Grand Ole Opry, especially if the sale is to TRT Holdings. As Nikhil Bhalla an analyst at FBR & Co. told Bloomberg, “The aim would be to realize synergies between Omni and Gaylord. You’ll have a larger portfolio of hotels and you can trim down the corporate overheads to manage both.”
Saving Country Music also theorized on April 30th about a partial Opry sale:
Gaylord is probably less likely to sell its Opry real estate assets of The Grand Ole Opry House and The Ryman since real estate is Gaylord’s new core business, but these properties could be split, or leased to The Hall of Fame or another entity as part of the sale of WSM and The Opry radio show.
According to Chris Jones, an analyst at Telsey Advisory Group in New York, this is a very real possibility…
Instead of seeking a buyer for the whole company, Gaylord could sell its assets while still maintaining managerial control over them. You could do a partial sale or a sale of a single asset whereby Gaylord would hold onto some form of a management contract of the facility.
This scenario would allow Gaylord to retain ownership of the real estate assets of The Grand Ole Opry House and The Ryman Auditorium, while still selling The Grand Ole Opry as a radio business along with its flagship station WSM in Nashville.
Whatever may or may not happen with Gaylord Entertainment and The Grand Ole Opry, the time is right for restructuring and selling assets. Gaylord stock is valued at a 28 percent discount compared to other hotel owners according to Bloomberg, and even though Gaylord has posted losses over the last couple of years, the company’s net income is expected to triple this year to $36 million as the economy improves. Gaylord’s stock has risen 43% this year, yet still remains grossly undervalued according to most analysts. It sits at roughly $34 a share, while analysts believe it would be worth $45 a share in a sale, giving Gaylord the capitol it needs to complete its Denver resort, its new Nashville Theme Park, and continue its resort expansion.
Gaylord CEO Colin Reed on a May 8th conference call said to shareholders, “Over the last six months, we’ve been looking at all options available to the company to unlock value…Over the last 12 months, our stock price has traded substantially below its true value.”
Gaylord Entertainment has owned The Grand Ole Opry since 1983. The company’s need to post profits for its shareholders has put it in occasional conflict with country music fans who expect country music’s oldest institution to stay in line with the traditions of the genre instead of chasing current fads to keep the public engaged in a business model that was originally constructed in 1925. Earlier this week, a new Gaylord venture was announced, a drama scheduled to air this Fall on ABC called Nashville.
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