Associated Press file photo -- A worker tightens bolts on a Lamar Advertising billboard in Texas.

Lamar Advertising Co., the Baton Rouge billboard giant, has received permission from the Internal Revenue Service to convert to a real estate investment trust.

The company’s conversion is expected to be effective as of Jan. 1, 2014. Part of that process involves merging Lamar into a new, wholly owned subsidiary. Shareholders must approve the merger.

Lamar shares spiked to $54.48, up $2.43, following the midmorning announcement. But shares quickly fell and closed at $51.16, down 89 cents on a day when market indexes generally were down. The company has traded in a 52-week range of $41.30 to $54.48.

Lamar has already completed the internal corporate restructuring necessary to comply with the real estate investment trust rules. Real estate investment trusts don’t have to pay corporate income taxes on profits as long as the trusts give at least 90 percent of profits to shareholders.

Lamar has been waiting on the IRS ruling since November 2012. The process typically takes three to six months.

The shift to a REIT allows firms to return excess cash to shareholders, avoid federal income taxes and boost the value of their stock.

The company said in 2012 that it generates more cash than it needs, and that a REIT would be a way to distribute excess cash to shareholders. Shareholders pay income tax on the dividends they receive.

As a REIT, Lamar projects 2014 net income in the range of $268.7 million to $278.3 million, or $2.81 to $2.91 per share, with annual dividends per share estimated at $2.50.

The company said it also expects to spend roughly $100 million on capital expenditures in 2014, with about $45 million of the total on acquiring new assets. The remaining $55 million will be spent to maintain its existing assets and for operating equipment.

Founded in 1902, Lamar operates more than 150 outdoor advertising companies in 44 states, Canada and Puerto Rico, logo businesses in 22 states and the province of Ontario, Canada, and over 60 transit advertising franchises in the United States, Canada and Puerto Rico.

The company has more than 144,000 billboards, 1,900 digital displays and 34,000 transit displays.