CBS to buy CNet for $1.8 billion

CBS to buy online pioneer CNet for $1.8 billion
NEW YORK (MarketWatch) — CBS Corp. will acquire CNet Networks Inc., a pioneering online provider of technology news and product reviews, for $1.8 billion cash, as the TV broadcasting giant took another step to use the Internet to rev up its growth.

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CBS) said it would pay $11.50 a share, a 45% premium to where CNet (CNET

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CNET) shares traded before the deal was announced. San Francisco-based CNet — target of a months-long pressure campaign by activist investors — operates Web sites including, ZDNet,, and

Investors reacted to the news by sending CNet’s stock up $3.44, or 43%, to $11.39 on heavy volume of 60 million shares. CNet’s 52-week high of $9.88 was set last May. CBS shares fell 3.4% to $23.98.
CBS said the deal provides another foothold into new advertising markets while also helping with its effort to gain a higher profile on the Internet.
“CNet Networks will add a tremendous platform to extend our complementary entertainment, news, sports, music and information content to a whole new global audience,” Leslie Moonves, chief executive of CBS, said in a statement. “Together, CBS and CNet Networks will have significant additional exposure to the fastest-growing advertising sector and can accelerate our growth through a number of new content, promotion and advertising initiatives.”
Upon closing, CNet Networks’ sites will be combined with CBS’s existing Internet unit, which oversees,,,,, Wallstrip and MobLogic.
Analysts cautioned while CBS stands to benefit from the move, the premium it’s offering may be questionable.
Chart of CNET
“It’s a very efficient way for CBS to expand its advertising reach, by offering CNet advertisers the chance to bundle ad buys across more of its properties,” said Sarah Rotman Epps, an analyst at Forrester Research.
However, CBS could be overpaying for CNet’s aggregate monthly audience of more than 140 million users, Epps said.
Underscoring the risks of the deal, Jason Bazinet of Citigroup pointed that the overall advertising climate has been “sluggish” due to a weakened U.S. economy.
The key challenge for CBS, said Bazinet, will be how to sustain the premium rates CNet’s sites have been able to charge advertisers. He estimated that CNet has commanded about $12 per thousand page views, “well above” rates earned by rival Web sites.
In recent months, CNet has been locked in a battle with the large hedge fund Jana Partners over the direction of the company. The fund, which obtained a 10% stake in CNet’s voting stock, was pushing management to alter its strategy to reverse a slowdown in growth.
Jana Partners and other firms including Spark Capital and Sandell Asset Management Corp. have been pushing for greater control of the company. The firms charge that CNet has underperformed peers and is run inefficiently.
CNet has struggled to deflect the funds’ overtures, and contested their ability to nominate directors in a Delaware court. However, the court ruled earlier this month that the funds may proceed with their nominations.
With regard to the CBS deal, a Jana Partners spokesman said the fund is “reviewing the transaction.”
By joining with CBS, CNet might acquire the financial muscle and other means to better grapple with emerging rivals covering technology trends such as TechCrunch, a popular blogging site.
Needham analyst Mark May called the deal “a good exit for CNet shareholders,” as CNet has only managed “modest growth” in recent years. He adds that while CBS could be seen as overpaying, “the strategic fit appears good.”
CNet’s board has approved the deal and recommended that stockholders accept the tender offer and tender their shares. The transaction is expected to close in the third quarter. End of Story
Steve Gelsi is a reporter for MarketWatch in New York.
David B. Wilkerson is a reporter for MarketWatch in Chicago.
John Letzing is a MarketWatch reporter based in San Francisco.

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