bloggingbuyouts

We haven't heard much from the Jana Partners LLC contingent following CBS Corp.'s May 15 announcement that it would buy CNet Networks Inc. for $1.8 billion.

Jana leads an investor group that wants to nominate directors and raise other matters at CNet's 2008 annual meeting. The firms have criticized the media company for failing to translate its strong brands into shareholder value.

Tech Confidential spoke with a person close to the proxy process who said that Jana and its investor group, which own roughly 21% of CNet, is still reviewing the transaction. At first glance, the deal supports Jana's reason for going after CNet, the person said.

Continue reading at TechConfidential.com.

With the proposed Microsoft (NASDAQ: MSFT) and Yahoo! (NASDAQ: YHOO) merger grabbing headlines, for investors looking at the next internet company that may be put in play, have a look at CNET Networks (NASDAQ: CNET). CNET shares a lot of similarities with Yahoo!, the most glaring being the continued under-performance of both the stock price and the company in general.

About two weeks ago, federal antitrust regulators cleared hedge fund Jana Partners LLC's increased stake in online media company. Jana Partners leads an investment group that said last week it now owns 10.6% of CNET's voting stock, up from 8.1%. Antitrust law requires companies and other investors to seek antitrust approval when they cross certain ownership thresholds.

The timing is interesting. If you are trying to profit from M&A in the internet space, take a look at CNET. It may be the next company to be acquired.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 2/3/08.

If imitation is the best form of flattery, then denial may be the best way to deflect criticism. That appears to be the tactic used by CNet Networks Inc. (NASDAQ: CNET) as it faces a potential takeover from hedge fund Jana Partners LLC.

During a fireside chat at a Citigroup Inc. conference on Wednesday, CNet chief executive Neil Ashe described a company that had overcome a number of challenges, is looking into new market opportunities and had generally a bright future. He made little mention of Jana's growing stake in the company, which now stands at 10.6%, nor of the escalating war or words between CNet, which has accused the hedge fund of trying to gain control at an unfair price, and Jana, which says it is being misrepresented.

Continue reading at TechConfidential.com.

DealBook is reporting that Jana Partners is leading a consortium which has taken major stake in CNet Networks (NASDAQ: CNET). The consortium is trying to replace CNet's directors and take control of the company's board.

Jana Partners is a $5 billion event-driven hedge fund founded by Wharton grad Barry Rosenstein in 2001. The consortium focused on CNet includes Sandell Asset Management and Spark Capital, a venture capital firm.

CNet has performed poorly over the last several years, and is currently in the red. Despite the impressive growth of online advertising, especially at tech-related sites, CNet has experienced falling ad revenues. One problem may be that it is simply too big. The 15 year old company has over 2,500 employees, and finds itself competing with similar sites that have only a few dozen people behind the scenes. No doubt that will be something the activists focus on as they seek control of the company.

DealBook takes a look at the downside of activist investors: when their ideas lead to (or would have led to) disastrous results.

For example, thankfully for shareholders of Ameritrade (NASDAQ: AMTD), SAC Capital's and Jana Partners' call for the company to acquire E*Trade (NASDAQ: ETFC) went unheeded.

This raises an interesting question: what exactly are activist investors good for? Given that most are hedge funds or other financial types rather than operational managers, I would argue that the value-creating abilities of hedge funds are limited to basically a few well-tuned strategies that have demonstrated their ability to create alpha over the years:

• Forcing out executives or directors who have performed poorly.
• Pushing an undervalued company to buyback its stock to return cash to shareholders.
• Pushing an undervalued company to hire an investment bank to explore strategic alternatives.

In other words, I think that activist hedge funds do the most good when they take on stock value and governance-related issues, not operational management. If the company has operational deficiencies, a hedge fund can push out the management and bring in someone better.

But, to paraphrase the DealBook headline, beware of hedge funds bearing operational advice.

A pair of hedge funds is pushing TD Ameritrade Holding Corp. (NASDAQ: AMTD) to merge with one of its peers. Their rationale? Cost savings and increased sales. The Associated Press reports that Jana Partners and SAC Capital Advisors, who combined own 8.4% of AMTD, are seeking to substantially increase their position -- driving AMTD up 9% after hours.

I envy the hedge funds' ability to put their mouth where their money is. I have all sorts of ideas I would love to see companies follow but I don't have their power to make them happen. If Jana and SAC are right that mergers will improve industry profitability then shareholders will benefit because the current stock market has not attracted enough individual trading volume to support three independent online brokers.

Jana and SAC accuse AMTD parent and 40% owner, The Toronto-Dominion Bank (TSE: TD), of blocking a merger with E Trade Financial Corp. (NASDAQ: ETFC) but TD says it only controls five of AMTD's 12 board seats. Jana and SAC think a merger could yield as much as $500 million in annual cost savings, from moves such as combining assets on one platform, and more than $100 million in yearly revenue benefits.

If Jana and SAC are right, TD, EFTC and The Charles Schwab Corp. (NYSE: SCHW) could be in play.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.