Tuesday, 20th May 2008
CBS Corporation to acquire CNET Networks, Inc.
On May 15, 2008 CBS Corporation announced that it has entered into an agreement to acquire CNET Networks, Inc. (http://www.cbscorporation.com/news/prdetails.php?id=3263). CBS offers US $ 1.8 billion for CNET Networks, Inc. in cash. As the board of directors of CNET has already approved the merger agreement and recommends to stockholders to accept the offer, it is expected that this deal will be completed in the third quarter of this calendar year.
CBS Corporation is a mass media company with many varied business activities in key international markets. It is a collection of media holdings operating in almost every significant field of media and entertainment: local TV stations, a TV broadcast network, outdoor advertising displays, radio stations, cable channels, and publishing. In contrast, CNET Networks owns many of the leading internet-based entertainment, news and information sites. In 2007, CNET Networks reported revenues of US $ 406 million with significant profits. This acquisition promotes CBS to one of the ten most popular web companies in the USA. But more important is that the company gains access to the valuable Chinese market and to the fast growing business of Internet advertising - these might be the real drivers behind the CBS-CNET deal. Yet, with the slowest growth rate in the past five years during Q4 calendar year 2007 for the overall advertising business, it remains to be proved that the offered US $ 1.8 billion are not overpaid. Additionally, CNET Networks, which is a complex business, recently has been criticized by one of its largest investors (Jana Partners, 10%) for failing to successfully realize its business potential. Also analysts are not too cheerful on this deal due to merger and acquisition risks and continued sluggish ad growth. They see that CBS is now becoming more vulnerable to decreasing ad spendings in economic unsafe times as already last year CBS alone derived 72% of its revenues from the advertising business.
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