CNet to Buy Rival Ziff-Davis in Stock Deal
Online technology news provider CNet Networks on Wednesday agreed to buy its biggest competitor, Ziff-Davis Inc., and its online business, ZDNet, for about $1.6 billion in stock.
The combination of the cross-town San Francisco rivals ends the 73-year independence of Ziff-Davis, whose print publications have ranged from Modern Bride to PC Magazine.
The takeover would combine two of the 20 most popular sites on the Web, both of which boast attractive audiences for advertising by computer and gadget companies.
“The combined entity clearly emerges as a category killer in tech-centric digital media,” said Credit Suisse First Boston analyst Bob Hiller in a research note.
And it will probably be among the largest of an expected slew of mergers and acquisitions among Internet content and commerce companies as investors grow impatient with unprofitability and wavering online advertising revenue.
“I’ve been looking for what gets the broad Internet sector moving again, and a catalyst is likely to be an accelerated pace of consolidation. Perhaps this is the start of that,” said analyst Derek Brown of WR Hambrecht & Co.
CNet started eight years ago as a cable television show and moved quickly to focus on the Web, becoming one of the handful of Net companies to turn a profit through news and then shopping services.
Ziff-Davis came to the online and cable business from the other direction, the world of print, and suffered from multiple strategies and never really pulled it together.
Stocks of Internet news sites have been battered this year. Salon.com and others have laid off staff to save money and others are seeking to reorganize or liquidate.
CNet went public in 1996 at a split-adjusted stock price of $4. It soared to a high of $79.88 last December, then tumbled to below $25 in the April Internet stock sell-off. On Nasdaq Wednesday, it slipped $2.50 to $29.69 on news of the deal.
ZDNet shares jumped $4 Wednesday to $16.88, still shy of its $19 March 1999 IPO price. It is mostly owned by the old Ziff-Davis, which already sold its print magazines and will complete the spinoff of its computer conference and trade show business, Key3Media. Japan’s Softbank owns most of Ziff-Davis.
Under the terms of the takeover, CNet would exchange 0.3397 of a share of its stock for each share of Ziff-Davis and 0.5932 share of CNet stock for each share of ZDNet.
CNet Chief Executive Shelby Bonnie would remain CEO of the combined company, and ZDNet CEO Dan Rosensweig would become president. The company would have 1,600 employees and projects more than $500 million in revenue in 2001.
Advertising sales still produce about 60% of CNet’s revenue. But the company also charges online tech stores for referring customers and provides packages of data on more than 100,000 pieces of hardware to computer distributors and buyers to aid in comparison shopping.
CNet plans to issue approximately 50 million shares of common stock in the transaction, worth $1.6 billion at Tuesday’s closing price. As a result, holders of Ziff-Davis stock will hold approximately 35% of the combined equity.
The transaction needs approval by antitrust authorities and is expected to close in the fourth quarter.
“Our vision is to provide trusted information and marketplaces for buyers and sellers of technology products. We supply the independent information they need to buy better, sell more efficiently, and be more productive in business,” Bonnie said in a statement. “Our union accelerates our ability to participate in this multi-trillion dollar global market throughout the supply chain.”
CNet said the combination will give it 16.6 million users and rank it as the eighth-most popular site on the Web.
*
Times wire services were used in compiling this report.
