AT&T Inc is in advanced discussions to acquire Time Warner Inc , sources said on Friday, a deal that would give the telecom company control of cable channel HBO, the CNN news network, film studio Warner Bros and other media assets.
The deal would be one of the largest in recent years in the sector as telecom companies look to combine content and distribution capabilities to match consumer demand for tailored offerings and online delivery.
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AT&T, which sells wireless phone and broadband services, has already made moves to turn itself into a media powerhouse, buying satellite TV provider DirecTV last year for $48.5 billion. Time Warner has a market value of about $70 billion and AT&T has a market value of about $230 billion.
Time Warner Chief Executive Jeff Bewkes rejected an $80 billion offer from Twenty-First Century Fox Inc in 2014, but sources said on Friday that the former suitor had no plans to renew its bid.
An agreement between AT&T and Time Warner could be announced as early as on Monday, said the sources, who asked not to be named because the talks are confidential.
Time Warner shares jumped 8 percent to $89.56 in Friday afternoon trading. AT&T shares were down 2.7 percent at $37.59.
The Wall Street Journal had reported earlier on Friday that AT&T and Time Warner were engaged in advanced talks and a cash-and-stock deal could come as soon as this weekend.
Time Warner was not immediately available for comment. AT&T declined to comment.
Cowen and Co analyst Doug Creutz, who said AT&T would need to pay at least $100 a share in mostly cash to acquire Time Warner, questioned the strategy of buying content instead of licensing it.
"What does it get them that they can't get by licensing Time Warner content and at a much cheaper price than buying the whole company?" Creutz asked, noting it was unclear what savings could be gained "from stapling distribution and content together. It's been tried. It never works."
AT&T would likely be able to win U.S. antitrust approval for the deal, some experts said, but it is unclear whether certain conditions would be needed to win that approval.
The U.S. Justice Department "will look at it but they won't stop it," said Darren Bush, who teaches antitrust issues at the University of Houston. Bush predicted regulators as a matter of course would make a second request for information, meaning the review would last several months.
Andre Barlow, an antitrust lawyer at the law firm Doyle, Barlow and Mazard, noted that the government may worry about whether other cable and internet companies would continue to have access to Time Warner content like HBO and CNN.
The media industry has been seen as ripe for consolidation, and several stocks rose on the news, including Netflix Inc, which was up 2.7 percent, and Discovery Communications Inc, up 4.8 percent.
(Reporting by Anya George Tharakan in Bengaluru, additional reporting by Diane Bartz and David Shepardson; Writing by Meredith Mazzilli; Editing by Clive McKeef ad Will Dunham)