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AT&T Aims for an Empire in Merger Talks With Time Warner

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The headquarters of Time Warner in New York. Today’s Time Warner is the byproduct of many rounds of spinoffs and acquisitions. Credit Time Warner/EPA

AT&T is in advanced talks to acquire Time Warner, according to three people briefed on the discussions, a deal that could be the largest in the United States this year.

The transaction is not yet final and may fall apart, said the people, who asked not to be named discussing private information.

Shares of Time Warner rose 9 percent in heavy trading Thursday afternoon after Bloomberg News reported the discussions. On Friday, its shares were up 8 percent, while AT&T shares were down nearly 3 percent.

With the recent run-up in its stock price, Time Warner has a stock market value of nearly $ 73 billion. AT&T is much larger, with a market value of $ 231 billion.

The apparent interest in Time Warner comes more than two years after AT&T announced a $ 48.5 billion deal for DirecTV, the nation’s largest satellite television provider. The merger created the country’s largest television distributor with about 26 million subscribers, surpassing Comcast.

Another large acquisition would be very difficult for AT&T to digest. The company has a debt load of about $ 130 billion, with just $ 7 billion in cash on hand.

With its wireless business facing limits to growth and television challenged more broadly, AT&T has sought to diversify through video content. Analysts have said it may pursue acquisitions to achieve that strategy.

Distributors like AT&T, Verizon Communications and Comcast have been either investing or buying companies that produce the content to gain control over their customers’ entertainment experiences. By purchasing DirecTV, AT&T obtained the rights to N.F.L. Sunday Ticket, giving customers access to every football game. The company also created a joint venture in 2014 with the Chernin Group to invest in media businesses and start internet streaming video services.

Still, AT&T has historically been less aggressive than its peers in building out a content empire. Verizon recently agreed to acquire Yahoo for $ 4.8 billion — AT&T was also a bidder and lost. Verizon also acquired AOL last year for $ 4.4 billion.

Comcast owns NBC Universal and has a stake in newer digital media properties, including Buzzfeed and Vox. Earlier this year, Comcast’s NBC division agreed to acquire DreamWorks Animation, which produced the “Shrek” and “How to Train Your Dragon” movies, for $ 3.8 billion.

Some analysts are skeptical that AT&T and Time Warner would actually reach a deal.

AT&T has said its “plate is full” in absorbing DirecTV, Mike McCormack, an analyst with Jefferies, said in a note. He also pointed out the high hurdles for the combined company to get regulatory approval from the Federal Communications Commission.

OPEN Timeline

Today’s Time Warner is the byproduct of many rounds of spinoffs and acquisitions, dating back to 1989, when Time Inc. merged with Warner Communications, then creating the largest media conglomerate in the world, with cable, publishing and movie assets. Seven years later, the company acquired Turner Broadcasting, bringing the cable network CNN under its wing.

In 2000, Time Warner merged with AOL, a combination that has since been seen as one of the largest mistakes ever made in deal making. After the dot-com bubble burst, the value of AOL declined significantly and the company had to write off a $ 99 billion loss. Time Warner later decided to spin off AOL.

It spun off the cable operations in 2009, and two years ago, the company spun off Time Inc., comprising publishing properties like Time magazine and Fortune.

Today, Time Warner’s units include such premium channels as HBO and Cinemax, as well as Turner, which operates TBS, Turner Sports and others, in addition to CNN. Time Warner also runs Warner Brothers Entertainment, which created movies like “Sully,” “Storks” and “Suicide Squad.”

In June 2014, Rupert Murdoch’s 21st Century Fox offered to buy Time Warner for $ 85 a share in stock. Time Warner spurned that offer, saying that it could create more value for shareholders by staying independent. Mr. Murdoch withdrew the offer that August.

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