Jana, Sandell Launch Offensive Against CNET

Jan 7 2008 | 1:11pm ET

Annoyed by its poor stock performance, activist hedge fund manager Jana Partners today launched a bid to take control of Internet media group CNET Networks.

The New York-based firm, backed by fellow hedge fund Sandell Asset Management, said it plans to nominate a pair of candidates to challenge the two CNET board members up for reelection at the company’s next annual meeting. It also plans a push to add five seats to the CNET’s board—which currently numbers eight directors—in an effort to gain control.

Jana complains that CNET’s performance is not up to snuff, pointing both to a 19% decline in stock price between 2005 and last year, as well as last year’s less than 1% return. The hedge fund owns an 8% voting stake and a similarly-sized non-voting stake in the company. Sandell owns a 5% non-voting stake in CNET.

San Francisco-based CNET quickly responded to Jana’s intrigues, calling its proposal “improper under the company’s bylaws” and arguing that “no person or group of persons should be able to gain a majority of the board and control of the company without offering sufficient value to all stockholders.” CNET rebutted Jana’s allegations of poor performance, saying it “has made significant strategic, financial, personnel and operational progress” since last year. It also noted that seven of the company’s eight directors are independent, and that management “is fully supported” by the board.

Jana has already fired the first salvo, with an affiliate filing suit to prevent CNET from junking its nominees based on its bylaws.

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