CNET Snaps Up Rival

CNET Networks Inc. made waves in the Internet business world Wednesday with the announcement that it will acquire rival Ziff-Davis Inc. in a stock deal valued at about $1.6 billion.

Ziff-Davis is the owner of rival technology information site ZDNet , as well as Smart Planet and the technology publication Computer Shopper.

Under the terms of the agreement, CNET will acquire the outstanding shares of Ziff-Davis common stock. Each share of ZD common stock will be converted into 0.3397 shares of CNET common stock and each share of ZDNet common stock will be converted into 0.5932 shares of CNET common stock. CNET said it expects to issue about 50 million shares of common stock in the transaction, valued at about $1.6 billion based on Tuesday’s closing price of $32.19.

The terms of the deal represent nearly a 50 percent premium for ZDNet but a discount of about 4 percent for ZD. Ziff-Davis recently spun off many of its holdings, including PC Magazine and will spin off its events business, which includes Comdex, Networld+Interop and Seybold Seminars. Ziff-Davis expects to pay a cash dividend of about $2.50 per share to its stockholders after the events business spin off. The company anticipates that the spin off and cash dividend will be completed in mid-August.

Ziff-Davis is the majority owner of ZDNet, and holders of ZD will own about 35 percent of the combined equity. Japan’s Softbank Corp., which owns a majority of Ziff-Davis voting stock, has already agreed to vote its shares in favor of the deal. Softbank will hold about 17 percent of the combined company. Members of CNET’s management, representing about 20 percent of CNET’s stock, have also agreed to vote for the merger. The transaction is expected to close in the fourth quarter.

Combined, the companies have an online audience of 16.6 million unique monthly users and would rank as the eighth largest property on the Internet with a reach of 22 percent, according to a Media Metrix statement issued in May. According to the July 24 issue of Business Week, CNET and ZDNet were among only 16 Internet companies that were profitable in 1999 or are expected to be profitable in 2000.

The companies will have cash and marketable securities of about $600 million.

The companies said the combined entity will deliver content and services under both the CNET and ZDNet brands in 23 countries. ZDNet has a strong presence in Europe and Asia.

CNET Chief Executive Officer Shelby Bonnie will remain CEO of the new combined company. Ziff-Davis CEO Dan Rosensweig will become president. CNET president Richard Marino will become chief operating officer. Barry Briggs will continue as president of ZDNet.

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