CNET acquisition metrics

On CNET transaction from Tommy Weisel analyst Lloyd Walmsley

Transaction Overview: The transaction value of $1.7bn net of cash (excluding any NOL benefit or synergies) equates to 4.0x revenue and 20.0x EBITDA using our 2008 estimates (and 3.9x and 21.5x on consensus estimates). Using 2009 multiples, the transaction equates to 3.6x revenue and 14.5x EBITDA on our estimates (and 3.5x and 16.6x on consensus estimates). The price equates to $13.60 per global unique user and $55.50 per domestic unique user based on the latest comScore data. The transaction is expected to close in 3Q and contains a breakup fee of 2%.

Comparable Transactions: Recent relevant transactions include Walt Disney / Club Penguin, which went for $350mn and 14x trailing EBITDA. Other notable transactions relevant to this deal include Microsoft’s bid for Yahoo! at $44.6bn or 18x forward EBITDA, NBC / iVillage in March 2006 at $596mn in transaction value, or 22x forward EBITDA, and News Corp. / IGN Entertainment in September 2005 at $650mn, or 30x forward EBITDA (in an environment of significantly higher trading multiples for Internet media companies).

Savvian actually had a 2005 press release on the original IGN acquisition - done right before they went public.

Based on IGN's trailing 12-month Ebitda of $9.69 million for the period ended June 30, the $650 million price represents a 67.4 times multiple. One industry source said that due to huge growth at IGN, News Corp. based its projections on the coming year, which this person said amounted to an Ebitda multiple closer to 30 times. Nonetheless, the price is still high for a company that has yet to record a profit. As of March 31, the company had accumulated a deficit of $23.3 million.

Their registration indicated $$28.8mm revenue 1H 2005, so if they did $60mm FY 2005 that would make the offer more than 10x revenue.