SiliconBeat

In their fight to gain control of CNET Networks’ board, a group of investors led by JANA Partners has set up their own Web site dedicated to the effort.

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CNET Networks and its nemesis shareholder, JANA Partners, exchanged words Thursday, a day after the online news site said it would lay off 120 employees and appoint a task force led by its chief financial officer in an effort to streamline its operations.

In a statement filed with the SEC by JANA Partners Managing Partner Barry Rosenstein, the investment firm issued said:

“It is astounding that it has taken years of shareholder value destruction for CNET to even start examining the basics of reversing its ongoing underperformance, and even then only after we began calling for change. Fundamental issues like these that we have raised should have been addressed years ago.”

The letter goes on to question the ability of CNET’s current management to successfully
address the “fundamental issues” facing the company, given that Read the rest of this entry »

Last Monday, we learned that a dissident group of shareholders was making a play to seize control of the board at CNet Networks (ticker:CNET). The online news site has a huge audience, but has been less than a hit financially.

Perhaps its biggest sin, though, is that it’s stock price looks like this over the past two years:

Led by Jana Partners of New York, the investors want to replace two of CNet’s current directors and expand the board by five more to gain a majority. They’ve filed a lawsuit to make things happen.

On Friday, Cnet struck back. The company announced it had adopted a poison pill in a series of SEC filings made on Monday. You can read all the gruesome details here.

In a press release, CNet said of the move:

“The Rights Plan is designed to deter coercive takeover tactics and to prevent an acquirer from gaining control of the Company without offering a fair price to all of the Company’s stockholders. The Rights will not prevent a takeover, but should encourage anyone seeking to acquire the Company to negotiate with the Board of Directors prior to attempting a takeover.”

In a nutshell, if any investor acquires more than 15 percent of the stock, the company would issue additional shares to dilute the holdings of all shareholders. By last Wednesday, Jana held 10.5 percent of the stock.

As you can imagine, the folks at Jana were pretty darn excited. Jana Managing Partner Barry Rosenstein told MarketWatch that the poison pill an “oudated and unpopular entrenchment mechanism.”

Well, unpopular with agressive hedge fund managers anyway.

In its filing Mondaywith the SEC related its hostile bid to enlarge and takeover CNet Network’s board, JANA Partners revealed it had been contemplating an investment in the online technology-and-news media company ever since an Oct. 10 meeting it had with Paul Gardi, a former Ask Jeeves executive who now manages Alex Interactive Media. At the meeting, Gardi “described what he believed to be operating issues” at CNet that, were they fixed, “could result in a significant increase in the value” of CNet’s shares.

Gardi is to be paid four quarterly payments of $25,000 as a consulting fee, and reap nine percent of any future profits from the CNet deal. The South African native is also among the nominees JANA would like to make to CNet’s board of directors.

We’re wondering if Gardi happened to read an Oct. 3 online item posted a week before his meeting with JANA titled How to Save CNetby Henry Blodget, the former senior Internet analyst for Merrill Lynch who was subsequently charged with civil securities fraud by the SEC. In it, Blodget suggested taking CNet private and bringing back Shelby Bonnie to run it. Bonnie was forced to resign as CNet’s chief executive in 2006 in the wake of a stock-option backdating scandal.

Blodget used DoubleClick, the online advertising software developer, as a model for the CNet takeover. DoubleClick, he wrote, was acquired at the “firesale price” of $1.1 billion in a 2005 deal engineered by San Francisco-based Hellman & Friedman, who then “sold some divisions, cut some costs, added some debt, waited a year and then flipped the new and improved version to Google for $3 billion.”

Blodget even suggested the private equity firm to do it: Quadrangle Capital Partners, the New York firm that recently hired Yahoo’s former chief operating officer Daniel Rosensweig– and a former CNet president.  He also served several years with Ziff-Davis Internet Publishing.

We were also interested to see Sandell Asset Management’s name pop up in the CNet brouhaha Monday. It has agreed to act in concert with JANA in its attempt to to take control of CNet’s board, the same Sandell that is waging a proxy battlewith another Bay Area technology firm, Sybase of Dublin.

That would also be the same Sandell that paid fines and had employees censured by the SEC to settle an enforcement matter in September related to questionable trading in 2005 in shares of Hibernia.