The board of Gaylord Entertainment has agreed to sell the Gaylord Hotels brand and the rights to manage the company’s four hotels to industry giant Marriott International. Following the sale, Gaylord will reorganize as a real estate investment trust.
Shares of Gaylord (Ticker: GET) jumped more than 11 percent to $38.33 in pre-market trading Thursday. It’s their highest level since late 2007.
The brand and rights sale to Marriott is worth $210 million in cash. Gaylord will maintain ownership of its hotel properties and other businesses such as the Grand Ole Opry. The move comes after a strategic review and is expected to save the company between $33 million and $40 million a year.
Officials said they want to complete their REIT conversion by Jan. 1 and expect to pay, late this year, investors a one-time stock-and-cash dividend of between $415 million and $450 million.
“We are pleased to be announcing today a transaction that we believe allows shareholders the potential to realize maximum long-term value for their shares in Gaylord Entertainment,” said Chairman and 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.”
Marriott will take over the management of the Gaylord Hotels brand under a contract with an initial 35-year term, 2 percent management fee and an incentive fee linked to profit growth.
In a morning conference call, Reed said joining the Marriott "machine" will boost business, especially from non-convention customers, citing the company's "expansive sales force and unique benefits such as its Marriott Rewards program."
Gaylord will not sell off the Grand Ole Opry or the Ryman Auditorium.
"Nothing will change at these iconic assets of the Nashville community, and Gaylord is fully committed to maintaining the legacy of these historic attractions," Reed said.
As part of its plans, the Gaylord team will not proceed as planned with its plans for a 1,500-room resort and convention center outside Denver. Instead, it will “re-examine how the project could be completed with minimal financial commitment [...] during the development phase.”
View the companies' full announcement here.