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CBS Corp. was looking for a jump-start to its business. What executives at the New York-based media company came up with is the $1.8 billion acquisition of Internet media company Cnet Networks Inc. From a credit perspective, Fitch Ratings (BBB long-term ratings; BBB senior unsecured debt rating and F2 short-term rating) and Moody's Investor Services (Baa3 long-term rating, P3 short-term rating) says the deal won't affect CBS' debt ratings.
The reason? Fitch says CBS will be paying for the deal with cash on hand, which is buoyed by the company's recent sale in its 37% stake in the Sundance Channel. In addition, Moody's anticipates CBS will generate free cash flow of over $1.2 billion over the next year from the acquisition. Overall, Fitch analyst Jim Rizzo seemed confident that a deal would fit into CBS' game plan. "CBS has sufficient capacity to become acquisitive, assuming reasonable multiples and synergies within the businesses acquired and proforma unadjusted gross leverage in the 3.0 times (x) range," Rizzo said. So for Fitch and Moody's, the deal's 45% premium is no problem, but for some stock pundits at TheStreet.com it might by a bit pricey considering CBS only a few years ago had trouble integrating online business site MarketWatch, which resulted in a sale of MarketWatch to Dow Jones in 2004. - Gerald Magpily See TheDeal.com: Cablevision nails Sundance
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