Robert Rowling has made his fortune with the well-timed bet. Now the Texas billionaire is rolling the dice on one of Nashville's most venerable brands.
With riches estimated at $6.2 billion and a business climate in which shareholders are clamoring for winning strategies, Rowling appears to have picked the right time to launch his campaign to wrest control of Gaylord Entertainment Co. from its current managers, observers said last week.
But Rowling's intentions for the company, which owns the Opryland Resort and Convention Center, Ryman Auditorium and the Grand Ole Opry, remain unclear.
In announcing plans on Thursday to nominate his own slate of directors, Rowling said his firm wants only to increase the value of Gaylord shares, which have plunged over the past 15 months. But Gaylord officials view the move as a step toward an acquisition — and one made on the cheap.
Outside observers largely agree with Gaylord, saying that Rowling has never been an investor who acts passively.
His most notable previous transaction in the hospitality industry, the 1996 purchase of Omni Hotels, resulted in widespread changes to the luxury chain. And with plenty of money from his firm's oil and gas holdings, Rowling has the cash and clout needed to grab the attention of shareholders.
"Omni is probably the best- funded hotel owner that I've seen," said John Keeling, a Houston-based executive with the hotel adviser PKF Consulting. "If Omni goes after a company, they usually get it."
The plan sets up a likely battle at Gaylord's upcoming annual meeting in May. Coming before an early February deadline for shareholders to submit their nominees to the board, Rowling has left himself ample time to lobby other Gaylord investors.
Their reaction Friday was positive. Shares in the company rose 44 cents to $11.85 a share on the first full day of trading after Rowling's letter critical of Gaylord's management was released.
"I think some legitimate issues are raised," said Robert LaFleur, an analyst with Susquehanna Financial Group who follows Gaylord. "Gaylord is going to have to address these issues."
Plans are unclearOne of the biggest questions remains just what Rowling would do with four board seats.
In an open letter to shareholders outlining his plans, Rowling disparaged Gaylord's current nine-person board as being too cozy with management to be objective. Rowling also criticized Gaylord's practice of allowing its chairmanship to be held by the company's chief executive, Colin V. Reed.
But Rowling has named only one of the candidates his investment firm, TRT Holdings, would nominate for a seat on the hotel chain's board — namely, himself. The only thing he said about the rest has been that they would have no affiliation with Omni, a hotel chain that competes with Gaylord.
Nonetheless, Rowling has made clear that his candidates would push for new leadership at Gaylord. In his letter, which Rowling circulated widely on Thursday, he described current management has having botched deals and squandered company assets.
Rowling also levied several direct attacks on Reed, calling him overcompensated at nearly $3.9 million in 2007 and suggesting that he had misused Gaylord's
$15 million corporate jet with frequent trips to his homes in Florida and Mississippi.
In a response, Gaylord defended its executives' record and governance practices. The company also reiterated its position that giving Rowling seats on the board would be tantamount to a back-door acquisition.
Observers said that Rowling's exact next steps are unclear, but the degree to which he is seeking to control Gaylord's future is anything but hidden.
"If it's a back door, it's very close to the front door," said Nell Minow, of corporate-governance research firm The Corporate Library, which tracks shareholder battles. "I don't think anybody's hiding anything."
A shake-up would be in keeping with Rowling's past practices. The son of a wildcat oilman, Rowling started his business career in Corpus Christi, Texas, by joining his father's firm Tana Oil & Gas in 1980.
In the ensuing decade, the Rowlings diversified into other sectors of the Corpus Christi economy, including banking, lodging and real estate. They flipped businesses to bigger players — Texaco, Bank of America, Unocal — eventually building a portfolio valued in the billions.
In 1996 TRT, the firm the Rowlings set up to manage their growing fortune, bought Omni from Hong Kong-based Wharf Holdings Ltd. for $500 million.
At the time, Omni was a little- followed firm based in New Hampshire, with a handful of luxury hotels scattered around the country.
Rowling fired the management team and moved the firm to Texas. From there, TRT has expanded the chain to 40 properties.
Omni's latest venture has been to increase its convention business.
Toward that end, the company this week will open its newest property, a 614-room hotel across the street from the Fort Worth Convention Center.
Taking control of Gaylord would further that strategy, Keeling said. Gaylord's convention center hotels are similar to the Omni in terms of quality, but they are all far larger than anything Omni has opened to date.
"Gaylord does not duplicate anything that Omni has," Keeling said. "And because Omni is so flush for cash from its pipeline business, it could do the expansions that Gaylord has found difficult."
Rowling finds flawsRowling cited what his company sees as missteps among several of Gaylord's previous expansion plans in justifying TRT's bid for more control.
Gaylord management squandered $12 million pursuing the acquisition of the Westin La Cantera Resort in San Antonio, Rowling said, a deal that Gaylord walked away from last year as market conditions deteriorated.
And the company failed to control costs at its newly opened Gaylord National hotel near Washington, allowing the cost per room to swell 55 percent over the original budget, Rowling added. He criticized management for purchasing the vacation management company ResortQuest in 2003, only to unload it four years later.
Such arguments could get a sympathetic reception from other investors. With the stock market and the economy in turmoil, many investors have been inclined to support new approaches to management, observers said.
"Investors are so unhappy that they may make decisions that in other circumstances they might not," said Minow. "The big secret of proxy contests is that you can't lose. The only way for the incumbent to beat you is to do a lot of what you're asking."
In making a play for Gaylord, Rowling is wagering that the odds are once again in his favor. The next four months may show whether once again he is right.
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