CBS To Buy CNet Networks For $1.8B

Deal Values CNet At $11.50 A Share, A 45% Premium Over Wed. Share Price

(CBS/AP)  Media and entertainment company CBS Corp. is buying CNet Networks Inc., an online news and information provider, for $1.8 billion in cash in its latest bid to expand its reach on the Internet, the companies announced Thursday.

The price of $11.50 per share represents a massive premium of 45 percent over CNet's closing stock price on Wednesday, and appears to get CNet out of a nasty battle with one of its largest shareholders, which had been agitating for a shakeup at the company after its stock slumped.

CNet shares jumped $3.48, or 44 percent, to $11.43 in morning trading Thursday. Investors didn't see the deal as positively for CBS, and pushed that company's shares down 89 cents, or 3.6 percent, to $23.93. Citigroup analyst Jason Bazinet said in a note that the "pricing risk is high" for CBS.

CBS's CEO Leslie Moonves told reporters on a conference call that acquiring access to CNet's large online audience in order to distribute media content from CBS was "a large part" of CBS' motivation in going after the San Francisco-based online company.

"Our idea is to have our content wherever, whenever you can get it, and adding CNet just makes that happen faster," Moonves said.

Moonves said CBS did not believe the purchase price was excessive, saying "We feel like we got a terrific value with this company."

Despite the high premium CBS is paying for CNet, CBS's chief financial officer Fred Reynolds called the price "fair" said the acquisition would immediately add to CBS's earnings. CBS will fund the acquisition with cash on hand.

CNet was an early pioneer on the Internet, but its executives have faced harsh criticism from dissident investors in recent months who say the technology news and entertainment company should be doing more to restore the $1 billion in shareholder value that has disappeared since December 2005.

CNet is known for technology reviews, news and advice but has also expanded into entertainment areas with a stable of sites that includes ZDNet, GameSpot.com, TV.com, mp3.com. It also owns the highly valuable Internet domain name News.com.

Moonves said he saw opportunities for distributing CBS news, music and other content on CNet's online outlets, and also for tapping CNet's significant online advertising sales operation to boost over ad growth for the media company.

CBS's chief of interactive business Quincy Smith has been moving aggressively to find new online outlets for its entertainment programming as more people shift their media consumption from traditional outlets like TV and radio to the Internet.

On Wednesday, CBS announced a partnership with Eqal, the company that came up with the online video hits "lonelygirl15" and "KateModern," to work on video programming that's integrated across broadcast television, online and mobile media platforms such as cell phones.

The acquisition, expected to close in the third quarter after shareholder and regulatory approval, would make CBS one of the 10 most popular Internet companies in the U.S., with 54 million unique visitors a month and approximately 200 million uses worldwide, CBS said.

CBS, which is also a major radio broadcaster, inked a deal in March to provide audio programming from all 140 of its radio stations to Time Warner Inc.'s AOL music service.

A group of investors led by the hedge fund Jana Partners LLC has led a proxy fight to get a slate of directors elected to the CNet board. They say CNet's management failed to take advantage of the company's online presence to grow revenue in line with the online advertising market.

A Jana Partners spokesman declined to comment on the CBS announcement.

CNet recently reported a narrower first-quarter loss and said revenue grew by 2.6 percent to $91.4 million.

The company was founded in 1992 by Shelby Bonnie and Halsey Minor. Bonnie was chief executive until 2006, when he resigned amid an accounting scandal related to the timing of stock option grants. To clean up that mess, CNet took non-cash charges of $105.7 million during the 10 years ending in 2005 and restated its financial statements.

Bonnie, one of the company's largest holders, still owns about 10.1 million shares. The sale would give him a windfall of $116.2 million. The stake was worth more than three-quarters of a billion in 1999, when CNet shares traded as high as $79 at the height of the technology bubble.

[Renegade.Rivers]

CNet has went down hill over the past few years, I hardly ever go there for anything. It will not get any better with CBS at the helm. CBS has very biased coverage of the issues of the day, and no doubt CNet will become even more biased to the advertisers that advertise on CNet.

[talkingham]

15 years ago the Republican liars in Congress would not let Ted Turner buy CBS because he was a liberal. However, they allowed full fledged neocon and not even a US citizen Rupert Fox Murdock buy anything he wants in this country and create a news network based on political lies. Don''t get me wrong. They are very good at it.

CBS has moved from a news gathering orgnization that allowed it''s prime time anchor Rather to be duped by a neocon dirty trick in Texas to just anothter endorser of the lies of the neocons who own just about every major news outlet in the US.

It''s not a free press, it''s a bought and sold press.

CNET is an insignifcant wasteful of money. Perhaps they thought some real news might leak out.

[CBSTV]

I access CNET''s web site regularly. It will be interesting to see what changes occur with CBS at the helm.

[ceethomas]

I agree with renrivers. CNet has worsened recently. And now with CBS running the ship, it will probably go off the radar for those who want fairness, truth, and reliability. Basically, media in this country has become a joke thanks to a continually spreading monopoly.

[missingamerica]

lollll..that is a lot to pay, when "Our idea is to have our content wherever, whenever you can get it" sounds to me like CNet''s primary value to CBS is equivalent to buying up all of the bus stop benches in a city so you can advertise your services on them...

[hypnotoad72]

Doesn''t cnet already own zdnet and techrepublic?

[jerrysohorni]

What the article is leaving out is download.com, download.com is CNET''s largest cash cow and is the biggest software download site in the world. This site alone is worth around $300 million

The also own gamespot.com which is easily worth around $100 million because it''s the top gamer site on the Internet and brings in huge revenue.

The other sites are not so popular and don''t bring in the revenue. CBS way over paid for it. The company is only worth tops $500 million.

A site to check out is http://www.advancedsearchcorp.com

[Keypinitreel1]

CNet is going to die... CBS cant even monitor a bulletin board on a website...how the hell are they gonna manage a major technical subdivision like that...

Wait I know... they will learn all the latest tricks and tips so their in house racist spammers can spam the entire world!!!!

[Keypinitreel1]

TraceyMorgan and his crew will be hurling racist insults at the rate of 1100 per minute, under 50 different screen names, across the entire spectrum of broadband BBS forums ...in English, Spanish, Portuguese, Chinese, Swahili, Arabic and Dutch.

[sistatee-2009]

I dare CBS to flip a coin. Heads; they pay 3.6 billion for it. Tails; they get it free. It''s only money, CBS, and you can''t take it with you.

[tommy6860]

ceethomas said:
"I agree with renrivers. CNet has worsened recently. And now with CBS running the ship, it will probably go off the radar for those who want fairness, truth, and reliability. Basically, media in this country has become a joke thanks to a continually spreading monopoly."

I guess Rupert Murdock and his gobbling down of news medias and newspapers isn''t like truth, fairness and reliability going off the radar, right? I''ll take any other news outlet, TV, or in hard copy, over Faux News and the Murdoch owned papers anyday.