Gaylord shares surge on deal with key shareholders

Shares of Gaylord Entertainment Co. surged on Tuesday after the convention resort operator announced it would allow two key shareholders to increase their stakes in the company and nominate directors to its board.

Gaylord shares jumped $1.36, or 28 percent, to $6.26 in late trading, joining a huge rally in the broader market after Citigroup Inc. announced it had operated at a profit during the first two months of the year. Gaylord's stock has traded between $4.76 and $66.96 during the past 52 weeks.

Gaylord agreed to boost the size of its board to 11 members and nominate two representatives of its largest shareholder, TRT Holdings Inc., and two representatives of money manager GAMCO Asset Management Inc. TRT's board designees include Texas billionaire Robert Rowling, who had criticized the company for excessive corporate spending.

Gaylord also said it will also increase the ownership trigger on its shareholder rights plan, or "poison pill," to 22 percent from 15 percent. A "poison pill" is intended to make a hostile takeover more expensive for the buyer.

TRT currently owns a 14.9 percent stake in the Nashville, Tenn.-based company. GAMCO and its affiliates hold a 13.4 percent stake.

The changes to Gaylord's poison pill also include an exemption for parties making a fully financed take-private offer. The bid must be at least 25 percent higher than Gaylord's share price at the time of the offer and 25 percent or more higher than the stock's 200-day moving average at the time.

Using Monday's closing price, Deutsche Bank analyst Chris Woronka noted that a 25 percent premium to Gaylord's 200-day moving average would equal $24.84.

TRT also agreed to support Gaylord's board slate through May 15, 2011.

JPMorgan analyst Kevin Milota upgraded Gaylord to "neutral" from "underweight," saying the agreement resolves "a potentially distracting and expensive shareholder proxy battle" and may lead to shareholder-friendly action from the new directors.

"Adding four independent directors should provide for greater accountability into financial decisions and spending by management," said Friedman Billings Ramsey analyst C. Patrick Scholes.

He maintained a "market perform" rating on Gaylord's stock, however, due to its high exposure to the struggling corporate group and convention segment of the travel market.

Scholes predicted that an offer will not be made within the next several months, until the stock's moving average price comes down further.

During a presentation at a Deutsche Bank conference on Tuesday, President and Chief Financial Officer David Kloeppel said the company expects a "very constructive working relationship" with the shareholders.

After the bruising public fight with Rowling, Kloeppel said he believes the company and the shareholder have "successfully buried the hatchet."