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Gaylord Entertainment Co. to Sell Gaylord Hotels Brand to Marriott

Gaylord Entertainment Co. has agreed to sell the Gaylord Hotels brand and the rights to manage its four hotels to Marriott International Inc. for $210 million in cash. Following consummation of the sale, Gaylord will continue to own its hotel properties and other businesses and will reorganize and elect to be treated as a REIT effective January 1, 2013.

The transaction is the result of a review of strategic options to maximize long-term value for shareholders. In concluding to pursue this option, the Gaylord’s board of directors and management team focused on three elements: the cash received in connection with the sale of the brand and management rights, the opportunity to realize substantial cost savings and revenue enhancements due to Marriott’s scale and reach in the hospitality market, and the company’s positioning as a well capitalized REIT focused on group-oriented destination hotels in urban and resort markets.

“Our months-long review of various options led us to the conclusion that the REIT structure represents the best pathway to realize the long-term value of our business and to position the Gaylord brand for continued growth,” Gaylord Chairman & CEO Colin V. Reed said in a statement. “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.”

Gaylord estimates annualized cost synergies, net of management fees, will total approximately $33 million to $40 million.

Upon consummation of the transaction, Gaylord Hotels will join the Marriott portfolio of brands. Terms of the management agreement call for Marriott to manage the four properties under the Gaylord Hotels flag. Marriott will receive a management contract with an initial 35 year term, 2 percent base management fee, and an incentive fee linked to improvement in hotel profitability.

Gaylord will continue to own and operate the Grand Ole Opry, Ryman Auditorium and other attractions as taxable REIT subsidiaries.

As a REIT, the company will adjust its investment approach on the Aurora, Colo. hotel and convention center project. The company will no longer view large scale development as a means for growth and will not proceed with the Colorado project in the form previously anticipated. Gaylord will re-examine how the project could be completed with minimal financial commitment during the development phase.

By year-end, the Gaylord plans to issue its shareholders a special, one-time taxable dividend of its undistributed earnings and profits, after receiving a private letter ruling from the Internal Revenue Service (IRS). Based on its preliminary analysis, the company estimates the amount of the earnings and profits distribution to total approximately $415 million to $450 million. Gaylord intends to pay 80 percent of the dividend in shares of Gaylord common stock and 20 percent in cash. The Company expects to incur approximately $55 million in one-time conversion, transaction and severance expense.

Gaylord’s four properties include Gaylord Opryland Resort and Convention Center in Nashville, Tennessee; Gaylord Texan Resort and Convention Center in Grapevine, Texas (Dallas-Ft. Worth); Gaylord Palms Resort and Convention Center in Kissimmee, Florida (Orlando); and Gaylord National Resort and Convention Center in Prince George’s County, Maryland (Washington, D.C.).

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