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CNET to buy Ziff-Davis
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July 19, 2000: 2:20 p.m. ET
Technology data company paying $1.6B in stock for media company
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NEW YORK (CNNfn) - CNET Networks Inc. agreed Wednesday to buy media company Ziff-Davis Inc. and its online subsidiary for approximately $1.6 billion in stock, creating one of the world's top producers of technology information.
Combined, the two companies will boast an online audience of 16.6 million unique monthly users, ranking it as the world's eighth-largest Internet property, with leading positions in Europe and Asia.
Terms of the transaction call for San Francisco-based CNET (CNET: Research, Estimates) to swap 0.3397 of a share for each Ziff-Davis share. CNET will also exchange 0.5932 of a share for each share of ZDNet, the tracking stock created by Ziff-Davis last year for its online businesses.
CNET, which provides data on technology and products over the Web and other media, expects to issue a total of about 50 million new shares in the transaction, valuing the deal at $1.6 billion based on the company's closing price of 32-3/16 Tuesday. CNET shares fell 4 to 28-3/16 in afternoon trading Wednesday.
 Ziff-Davis shareholders will hold about 35 percent of the combined company. Japan's Softbank Corp., which owns a majority of voting stock of Ziff-Davis (ZD: Research, Estimates), has agreed to vote in favor of the deal.
CNET CEO Shelby Bonnie said in a conference call the two companies have less overlap than people may think and praised the underlying fundamentals of both firms.
"People should know this is a union of two profitable Internet companies," Bonnie said.
Bonnie will retain his post, while Dan Rosensweig, president and CEO of ZDNET, will become president of CNET Networks Inc. Richard Marino, president of CNET.com, will become chief operating officer of CNET Networks.
New York-based Ziff-Davis has undergone a radical transformation during the last six months as it tried to transform itself from a high-tech publishing powerhouse to an online media company.
The company sold its massive publishing unit to Willis Stein & Partners, an investment firm, for about $780 million and then unloaded its cable television operation to Paul Allen's Vulcan Ventures. Earlier this year, the company said it would spin off ZDNet as a separate company and merge its remaining operations into that entity.
Rosensweig said the decision to be acquired was not difficult, even considering the effort ZDNet has put into become a strong independent company.
"We saw the opportunity for both companies to seize the day," Rosensweig said. He added ZDNet will keep it brand name.
"The ZDNet brand will not only survive, but thrive," he said.
Creating a top 10 site
CNET combines online technology news and product reviews with a shopping engine. Users can use CNET to conduct research on technology products such as home computers, find the best product and then use CNET's comparison-shopping engine to find a good price, said analyst Matt Finick of Thomas Weisel Partners LLC.
The deal will expand CNET's global reach, Finick said. CNET is only in eight international countries, including China and Japan, while Ziff-Davis reaches 25 international markets, he said.
"You are taking the No. 1 and 2 technology-centric news and information services companies and far and away creating the dominant brand," Finick said.
The acquisition will create a 25 percent overlap in traffic and 20 percent in advertising, he said, but the combined entity will have more traffic and advertisers than each company separately.
The two companies also run neck-and-neck on the Internet. In May, CNET ranked as the 18th top Internet site with 10.5 million unique users while ZDNET was 19th with 10.1 million users, analysts said.
"The deal potentially makes them a top 10 online site based on monthly unique users," Finick said.
Ziff-Davis said Wednesday it will follow through on plans to spin off its trade show and conference business and pay a cash dividend of about $2.50 per ZD share. Lazard Freres acted as financial adviser to CNET while Morgan Stanley & Co. advised ZDNet.
Both the spinoff and dividend will be completed in mid-August. The CNET deal is expected to close in the fourth quarter.
As part of the deal, CNET will also acquire Ziff-Davis' Computer Shopper, a technology publication, and related Web sites.
Ziff-Davis shares climbed 1-3/4 to 13-1/8 in afternoon trading Wednesday while ZDNet (ZDZ: Research, Estimates) shares jumped 3-1/8 to 16. 
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