Jana pushing for CNET shakeup

By Paul Thomasch

NEW YORK (Reuters) - Investment fund Jana Partners LLC said on Monday it is leading a group of funds seeking to take over CNET Networks Inc's CNET.O board and boost the online media company's share price.

Jana and its partners own about 8 percent of CNET's voting stock and hold an 8 percent nonvoting stake. Another investment fund that is supporting Jana, Sandell Asset Management Corp, has a 5 percent nonvoting stake.

"We are pleased to support Jana in this effort to improve the performance and ultimately the valuation of CNET to the benefit of all shareholders," Tom Sandell, chief executive of Sandell Asset Management, said in a statement.

CNET, which has expanded beyond its original technology news site to include online game and entertainment brands such as Gamespot, TV.com, MP3.com and BNET, rejected the Jana proposal saying its by-laws made it "improper."

Its shares slipped 10 cents to $8.46 in Nasdaq trading after initially rising as high as $9.10 following the news.

In a statement, CNET said "no person or group of persons should be able to gain a majority of the board and control of the company without offering sufficient value to all stockholders."

Jana criticized the poor performance of CNET's stock. It said the shares rose less than 1 percent last year, compared with gains of about 10 percent for the Nasdaq, and fell 19 percent in the three years through 2007, compared with a 22 percent rise for the Nasdaq.

Jana said it would nominate seven members to the CNET board. It said it consulted with Spark Capital, a venture capital firm, and Alex Interactive Media's Paul Gardi, a well-known technology entrepreneur, to select the nominees.

It said it would nominate Gardi and Spark's Santo Politi to replace the two CNET directors scheduled to stand for re-election at the company's next annual meeting.

In addition, Jana is proposing that stockholders expand the CNET board from eight members to 13 and fill the resulting five vacancies with Jana nominees.

The five are Jon Miller, the founding partner of Velocity Interactive Group; Jaynie Studenmund, a member of the board of Orbitz, eHarmony, Western Asset and Countrywide Bank; Julius Genachowski, managing director of Rock Creek Ventures; Brian Weinstein, an executive with Creative Artists Agency; and Giorgio Caputo, managing director of Jana Partners.

A Jana affiliate has filed suit seeking to enjoin CNET from rejecting the nominations on the basis of its corporate bylaws.

(Editing by John Wallace and Maureen Bavdek)