Buzz up!CBS buying Cnet for $1.8 billion

CBS Corp. is buying San Francisco technology news provider Cnet Networks Inc. for $1.8 billion in a cash deal that will make CBS one of the 10 largest Internet companies in the country, the companies announced Thursday.

Under the terms of the agreement, Cnet investors will receive $11.50 a share, a 44 percent increase over Wednesday's closing price of $7.95 a share.

"Our little San Francisco-based Internet company has grown up and become part of a huge media company. We couldn't be more excited," said Neil Ashe, Cnet's chief executive officer, from CBS' headquarters in New York.

Ashe said CBS' offer was too compelling to refuse from a financial and business perspective. "This is really an opportunity for us to accelerate that growth and take advantage of resources that really no one else has but CBS," he said.

Cnet's shares closed Thursday at $11.41, up $3.46 or 43.5 percent, to mark a 52-week high. CBS' shares dipped 59 cents to close at $24.23.

Cnet Networks, founded in 1992, owns many sites including Cnet, ZDNet, CnetNews.com GameSpot, TV.com, UrbanBaby, Chow, Search.com and MySimon. CBS, based in New York, will combine Cnet's sites with its own, which include CBS.com, CBSSports.com and CBS Radio upon the deal's closing, which is expected in the third quarter.

CBS CEO Les Moonves said in a conference call with analysts that Cnet offers his company a platform to boost existing interactive businesses as well as launch new ones. He said it will also increase online advertising and international opportunities, particularly in China.

"There are very few opportunities to acquire a profitable, growing, well-managed Internet company like Cnet Networks," Moonves said in a release.

Analysts said the deal makes sense, but the price seemed a bit rich considering Cnet's financial performance.

Cnet reported first-quarter revenues of $91.4 million, a 3 percent growth over the same quarter last year. Net loss for the quarter was $6.1 million (4 cents per share) compared with a net loss of $9.1 million (6 cents) for the first quarter of 2007. The results reflect a restructuring charge, the company said.

"The strategy makes some sense, but the price is some concern. They're paying a pretty good premium - over 40 percent," said Robin Diedrich, senior consumer analyst with Edward Jones & Co., who recommended a "hold" on CBS shares.

"It would take some finesse by CBS to be able to, probably over the course of some time, make these prop perform a bit better," she said.

James McQuivey, principal analyst with Forrester Research, said CBS probably paid the premium to move the deal forward quickly.

The combination of the two companies offers content opportunities and helps give CBS a slightly younger, tech-savvy audience in the Silicon Valley, McQuivey said. But he also said he expected Cnet to reduce its workforce in the next year or two.

Cnet's Ashe said CBS had committed to keeping the company in San Francisco and retaining its management team. "This isn't about people losing their jobs; it's about us growing and building a next-generation media company that combines the best of what CBS and what Cnet has to offer," he said.

Thursday's announcement comes amid an attempt by a group of investors, led by hedge fund Jana Partners LLC of San Francisco and New York, to take over Cnet's board out of frustration over Cnet's financial performance.

Paul Kranhold, a spokesman for the investor group, declined to comment, saying the group had not had a chance to review the terms of the deal.

Cnet has weathered some difficulties in recent years. The company's former chief executive and founder, Shelby Bonnie, resigned in 2006 amid allegations that some of his backdated stock options had been accounted for illegally.

It also was involved in some unsuccessful ventures, such as an online photo-sharing business called Webshots, which it sold for $25 million less than its purchase price last year.

Bonnie, according to the Associated Press, is still one of the company's largest shareholders with about 10.1 million shares. He is expected to get a windfall of $116.2 million as a result of the sale to CBS.