Viacom baulks at $20 billion EA price tag

Media giant Viacom has considered purchasing leading publisher Electronic Arts, but decided that such a buyout would be unfeasible due to the high price tag attached to the company - believed to be around $20 billion.

Although it is involved with almost every other aspect of the media business, Viacom has no finger in the game publishing pie - with company chairman Sumner Redstone's controlling stake of Midway being privately held - and is thought to want to rectify this situation by acquiring a profitable publisher.

"We have looked at the obvious companies like Electronic Arts," admitted Redstone, speaking in his capacity as Viacom chairman to a conference in New York, "which is clearly the leader in the field.... But their price is so high, it would be dilutive to our earnings. We have ruled it out."

Electronic Arts currently has a market capitalisation of over $15 billion, which would probably mean an overall buyout price of around $20 billion given the need to present an attractive price premium to shareholders.

That's too rich for the blood of even a giant corporation like Viacom - but if the company is serious about getting into the games industry, it is certainly looking at other companies, many of which present more attractive takeover targets than the market leader.

Activision, for example, is a profitable company which is approaching a billion dollars a year in revenue but has a market capitalisation of just over $2 billion - meaning that it could probably be bought out for under $3 billion. Take Two is another attractive possibility; it too has almost a billion dollars in annual revenues, and healthy projections despite some recent financial uncertainty, but has a market capitalisation of under $1.5 billion.