May 15, 2008 / 11:57 AM / 11 years ago

CBS to buy web publisher CNET for $1.8 billion

NEW YORK (Reuters) - CBS Corp (CBS.N) said on Thursday it would buy web media company CNET Networks Inc (CNET.O) for about $1.8 billion to boost the television broadcaster’s reach across the Internet.

The deal could also put to rest a brewing fight between CNET and an activist investor group led by hedge fund Jana Partners, which wants to shake up the web company. The deal values CNET at $11.50 per share and represents a 45 percent premium to its closing price on Wednesday.

On completion of the purchase, expected in the third quarter, CBS’s digital properties would be home to 54 million unique monthly users in the United States and about 200 million users worldwide, the companies said.

While overshadowed by the number of users who visit sites from Yahoo Inc YHOO.O, Google Inc (GOOG.O) or News Corp’s NWSa.N Fox Interactive each month — between roughly 90 million and 140 million — the deal would still make CBS’s properties among the most popular in the United States.

“Our goal is to have our content in as many platforms as possible,” CBS Chief Executive Leslie Moonves said in an interview. “And it’s important for us to be in the new media space in a big way. When you can become one of the top 10 Internet sites in one fell swoop you should take advantage of that.”

As recently as last month, when CBS announced earnings, Moonves said it would look at acquisitions to help bolster the digital business, following a $110 million deal for an international billboard and outdoor advertising company.

But at the time he said there were no plans to announce any major acquisition. In his interview on Thursday, Moonves said the CNET deal came together “pretty quickly,” despite being the largest acquisition for CBS since it split with Viacom Inc VIAb.N at the close of 2005.

“It did come together in the last two or three weeks,” he said, adding he did not expect this to start an acquisition spree for CBS. “We’re always looking, I would highly doubt you see us do anything of any size soon.”

To date, CBS said, it has not spoken with CNET’s activist investor group, which introduced last month a plan to boost earnings by reaching a partnership with Web search leader Google Inc (GOOG.O), revamping its own search and adding social networking features to its sites.

A representative from Jana Partners said it was reviewing the transaction, but declined to comment further.

CBS said the purchase would help boost its earnings from the start and it expects CNET and the CBS Interactive unit combined would reach $1 billion in revenue by 2010 or 2011.

Moonves said the deal would be funded from excess cash on CBS’s balance sheet and would not affect its dividend.

CNET’s network of Internet sites including ZDNet,,, and The company posted $406 million in revenue in 2007.

But it has also been under pressure, with investors complaining about a stock down about 10 percent in the last year. Earlier this year, San Francisco-based CNET said it would eliminate 120 jobs, or about 10 percent of its staff, in a restructuring to help it focus on long-term growth.

CBS said the combination would help it accelerate growth within its own portfolio of sites, such as and, as well as give it the ability to create new Internet destinations.

Miller Tabak analyst David Joyce said investors may well be surprised that CBS was making such an acquisition, but added that the potential benefits from integrating the two companies’ web news and advertising operations could help CBS shares down the road.

Another analyst, Citigroup’s Jason Bazinet, said the unexpected deal marked a bid by CBS to get more traffic, but noted that the “pricing risk is high.”

“After the recent sell off, we think CBS’ shares are closer to fair value,” he said in a note. “However, M&A risk and sluggish ad growth continue to keep us on the sidelines.”

CBS Class B shares were down 74 cents or 3 percent at $24.08 on the New York Stock Exchange on Wednesday. CNET surged $3.45 or 43.4 percent to $11.40.

Additional reporting by Michele Gershberg; Editing by Derek Caney and Gerald E. McCormick

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