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Updated from 1:52 p.m. EDT

CNet Networks

(CNET) - Get ZW Data Action Technologies Inc Report

said Wednesday that it would buy



along with its Web subsidiary,



, for stock valued at $1.6 billion, in a deal that would bring together two of the leading technology information sites on the Internet.

The acquisition, which would create a company with more than half a billion dollars in revenue, will give San Francisco-based CNet an additional 10 million users and extends the company's global reach.

The union melds two complementary players, creating a "global technology powerhouse" with a much broader base of users, Tonia Pankopf, analyst at

Goldman Sachs

, said in a research report.

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Under terms of the deal, CNet will exchange 0.3397 of its shares for each of Ziff-Davis' roughly 104 million shares and 0.5932 of its shares for each of ZDNet's 15.3 million shares, said Robert Borchet, vice president of investor relations for ZDNet.

Based on CNet's closing price of 32 3/16 on Tuesday, each Ziff-Davis share would be valued at $10.92 while each ZDNet share would be valued at $19.09. Ziff-Davis shareholders will also receive a cash dividend of $2.50 a share.

Yet after news of the acquisition hit Wall Street on Wednesday, shares of CNet -- which disseminates information about computers and technology via the Internet, television and the radio -- fell well below their opening price.

CNet fell 2 9/16, or 8%, to close at 29 5/8. But ZDNet and Ziff-Davis retained premiums over their Tuesday prices, with ZDNet's stock finishing up 4, or 31.2%, at 16 7/8. Ziff-Davis, closed up 2 1/16, or 18%, at 13 7/16.

CNet will apparently be able to pull a large number of loyal ZDNet users under its umbrella. Only 3.7 million users -- or a quarter of the total traffic heading to both companies' sites -- visited CNet and ZDNet in the month of May, Pankopf of Goldman Sachs wrote. That's "quite low," she said, considering each company's prominence on the Web.

"ZDNet has had a long-standing lead over CNet in the enterprise market, which has until recently become a focus for CNet," she wrote in her report. "CNet, on the other hand, has traditionally had a larger audience in the consumer home market."

While the agreement must gain shareholder approval, it already has won the support of


of Japan, which owns a majority of Ziff-Davis voting shares. In addition, members of CNet management who control about a fifth of the company's stock favor the deal, CNet said in a statement.

First, however, Ziff-Davis must spin off its trade show and conference business, a move the company expects to complete in mid-August. At the same time, Ziff-Davis said it would give its shareholders the $2.50-a-share cash dividend.

Shelby Bonnie, CNet's chief executive, will occupy the same post as part of the combined entity, while ZDNet Chief Executive Dan Rosensweig, who has been with Ziff-Davis for nearly two decades, will be president.

The new entity, which will employ about 1,600 people, will deliver information under both the CNet and ZDNet brands in more than 20 nations. When the deal is finalized, CNet also will get Ziff-Davis's Computer Shopper magazine and Smart Planet services.

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