This morning we were wading through the 3,000 word letter from Carl Icahn when the news flashed across our screens that CBS had agreed to buy CNET for a staggering $1.8 billion, a 45 percent premium from where the shares were trading before the news. Our first thought was that this must be a very good day for the folks over at Jana Partners, Spark Capital Sandell Asset Management Corp, the hedge funds that have been agitating for changes at CNET for months. Our next thought: how the Hell can CBS justify that kind of valuation?
“It’s like taking a street hooker to the Ritz when she’ll settle for an alley,” one internet insider told us.
That’s entertaining if not very enlightening. CNET has been a struggling brand for ages. The argument of Jana Partner’s was that CNET could be saved from oblivion if the management got serious about cutting costs and revving up its online ad revenue by using a third party like Google’s DoubleClick. CBS doesn’t seem to be seriously considering either, according to published statements.
There doesn’t seem to be much synergy between CBS and CNET. But Les Moonves sounds very excited about the deal because it gives CBS a “totally a great new distribution system.” Peter Kafka has a great summary of the conference call but nothing in it persuades us that this is anything but eyeball valuation, 1999-style.
CBS Buying CNET For $1.8 Billion; CBS Predicts $1 Billion Interactive Revenues By 2010 [Alley Insider]