Why would they offer up a 45% premium for a company that’s seen its stock slump recently? Let’s speculate shall we?
- CBS had money burning a hole in its pocket.
- CNET had more than one suitor, so enjoyed a behind the scenes bidding war.
- CBS wanted to offer enough of a premium to satisfy its grumbling investors.
My vote is on option 3–with maybe a little of option 1. CBS will clearly benefit from CNET’s vast footprint in online media, but I believe the premium is likely an attempt to avoid any conflict with CNET’s dissenting investors.
A group of investors led by New York hedge fund Jana Partners LLC has been agitating for a shake-up at CNet after its shares fell sharply in the past year. Jana Partners has led a proxy fight to get a slate of directors elected to the CNet board.
The investors say CNet’s management has failed to take advantage of the company’s online presence to grow revenue as quickly as the advertising market is increasing.
Had CBS offered a single digit premium for CNET’s stock, Jana et al would have likely complained it wasn’t enough, tried to fight the acquisition, and perhaps confused investors with talk of the need for alternative bids.
While Jana Partners spokesman did not have a comment “yet,” I suspect that the 45% premium is designed to ensure the only comment they make is “woohoo!”