Dissidents Seek Control of CNet By Expanding Company Board
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Tuesday, January 8, 2008
A group of dissident investors is attempting to seize control of CNet Networks' board in an effort to shake up the online news and entertainment company, which has been struggling for years to capitalize on one of the Internet's largest audiences.
The rebellion, disclosed yesterday in a filing to the Securities and Exchange Commission, may raise the stakes of CNet's annual shareholders meeting, which is usually held in May or June.
San Francisco-based CNet vowed to fend off the uprising, which it characterized as a violation of company rules designed to prevent short-term investors from gaining control of the board without providing a payoff for other shareholders.
Led by New York-based Jana Partners, the dissident investors seek to replace two of CNet's directors while also gaining shareholder approval to change the company's bylaws to expand the board from eight members to 13.
Expanding the board could enable Jana and its allies to gain control of seven of the 13 board seats.
The Jana group sued CNet yesterday in the Delaware Court of Chancery, seeking an injunction that would allow Jana to present its proposal to shareholders.
Jana will need the backing of other shareholders to pull off its coup. The group, which also includes Boston-based venture capital firm Spark Capital and former Internet executive Paul Gardi, holds a roughly 16 percent stake in CNet, including derivatives that can be converted into stock.
CNet lost almost $26 million through the first nine months of 2007, deepening from a $325,000 loss during the comparable 2006 period.
"This effort is about taking an underperforming company and increasing shareholder value by building on its top-notch editorial talent and premier Internet assets," said Barry Rosenstein, Jana's managing partner.
CNet reaffirmed its belief in an overhaul being engineered by its chief executive, Neil Ashe, who took over in late 2006 after the company's co-founder, Shelby Bonnie, resigned over backdated stock options.
The company "continues to execute on its strategy to drive long-term growth by realizing the full potential of its brand and pursuing new growth opportunities," CNet said in a statement.
