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Time Warner Soars on AT&T Speculation

Time Warner Inc. stock soared nearly 10% Thursday after a Bloomberg News report said AT&T has held informal talks with the programmer, including preliminary conversations about a possible merger.

Time Warner shares were trading as high as $86.75 each earlier Thursday (up 9.5%, or $7.51 each) after the Bloomberg report said the two had discussed a possible takeover. The stock closed at $82.99 per share on Oct. 20, up 4.7% or $3.75 each.

Time Warner has been the target of much merger speculation ever since 21st Century Fox abandoned its unsolicited $80 billion offer for the company in 2014. AT&T has also reportedly been on the hunt for content to fuel its over-the-top endeavors, including DirecTV Now, which is scheduled to launch in the fourth quarter.

According to the Bloomberg report, talks were informal and were more about building relationships between the two companies. Neither side has hired a financial adviser, Bloomberg said, citing unnamed sources.

The talks would play into what some reports have said is growing sentiment that vertical integration, combining distribution and programming assets, is gaining favor with some providers. But while Comcast has had success with its purchase of NBC Universal, other distributors have spent the past five years uncoupling programming and distribution assets, including Time Warner, which spun off its Time Warner Cable unit in 2009.

Telsey Advisory Group media analyst Tom Eagan said in an interview that he would not be surprised if AT&T and Time Warner were talking, but had doubts about the telco absorbing  another mega-deal so soon after its 2015 purchase of DirecTV for $48.5 billion. Some estimates have put Time Warner Inc.’s potential price tag at more than $95 billion.

“They’re always talking,” Eagan said. “AT&T is a big distributor and Time Warner is a high-profile content company. But it would surprise me if the follow-up to buying DirecTV, which they acquired to lower programming costs, is to buy a programmer.”

Time Warner declined to comment.