AT&T; is near an agreement to acquire Time Warner in a deal that values the company at about $US110 a share, people with knowledge of the matter said.
That values Time Warner at about $US86 billion, based on the company's outstanding common shares. The structure of the deal will be about a 50-50 cash and stock split, said the people, who asked not to be identified because the information is private.
A combination of AT&T; and Time Warner would form a media empire that will own many of the movies and TV shows it pumps through to subscribers of its wireless, internet and pay-TV services.
Time Warner closed at $US89.48 on Friday in New York, giving it a market value of about $US70 billion. A price of $US110 a share would reflect a premium of about 23 per cent.
An agreement could be approved Sunday and announced as soon as Monday, the people said. Talks are ongoing and a deal could still fall through, the people said.
Representatives of the companies didn't immediately respond to requests for comment.
Time Warner chief executive officer Jeff Bewkes is a willing seller if he gets an offer he thinks is fair, said one of the people. Bewkes and his board rejected an $US85-a-share approach in 2014 from Rupert Murdoch's 21st Century Fox, which valued Time Warner at more than $US75 billion.
AT&T; has transformed itself over the last decade from a regional phone company to a national telecommunications powerhouse. Its plan to focus on media and entertainment targets include companies worth $US2 billion to $US50 billion, people familiar with the plans said earlier this month.
"There's a lot that's attractive about Time Warner," media industry veteran Peter Chernin, who runs an online video joint venture with AT&T;, said in an interview on Thursday on CNBC. "I think they're both great companies." He said he didn't know anything about a deal.
Time Warner shares had gained more than a fifth this year before a report of talks between the two companies were reported earlier this week, boosted by sales gains at both its HBO premium channel and Turner cable-TV unit. AT&T; was up 12 per cent in 2016, valuing the Dallas-based company at about $US238 billion.
Last year, AT&T; paid $US48.5 billion to acquire satellite-TV provider DirecTV, its biggest deal in at least 10 years, according to data compiled by Bloomberg. AT&T; has been developing an internet-based version of the pay-TV service, called DirecTV Now.
"With the pending launch of the DirecTV Now OTT app, it might make sense to move onto content ownership, but Time-Warner is an awfully big first step into the content world," said John Butler, an analyst at Bloomberg Intelligence, in an e-mail.
The results are mixed with blockbuster deals that bring outsiders into the media industry. Comcast has had a largely successful run since acquiring control of NBCUniversal in 2009. But Time Warner itself had one of the most disastrous mergers of all time when it combined with America Online in 2000.
With $US7.2 billion of cash on hand, AT&T; doesn't have enough firepower to make a big deal with cash alone. In the wake of the DirecTV purchase and the $US18 billion it spent in the federal airwave auction last year, AT&T;'s net debt was $US120 billion at the end of June.
Moody's Investors Service calculates the company's adjusted leverage at 3.1 times earnings and says the company's rating, three levels above junk, could be downgraded if it doesn't stay on track to fall below 3 times.