NEW YORK, Oct. 22 (UPI) -- Telecom giant AT&T said it has struck a deal to purchase the entertainment titan Time Warner for $85.4 billion.
The company will pay $107.50 per share in a half cash, half stock purchase, transforming one of the nation's oldest telephone companies into a media giant.
The merger, if approved, would mean AT&T assumes ownership of several household names in the news and entertainment world, including CNN, HBO, Warner Brothers films, TBS and TNT.
The Wall Street Journal said AT&T CEO Randall Stephenson will lead the merged companies and Time Warner CEO Jeff Bewkes will leave the company after a transition period.
Stephenson said the deal will enable AT&T to begin merging the video content customers want with the mobile devices they increasingly use to access it.
"This is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers," Stephenson said in a press release announcing the deal. "Premium content always wins. It has been true on the big screen, the TV screen and now it's proving true on the mobile screen. We'll have the world's best premium content with the networks to deliver it to every screen."
Time Warner spun off its cable and Internet business in 2009, creating Time Warner Cable, which was recently purchased by Charter Communications for more than $50 billion.
AT&T's core business for decades has been landline and cellular telephone service. The Time Warner merger comes at a time when the U.S. telecom market is essentially saturated, forcing industry giants to branch out into new businesses in order to grow.
Competitor Verizon recently agreed to purchase the Internet companies Yahoo! and AOL in a similar effort to diversify.
As part of the deal, AT&T agreed to take on Time Warner's debt and Time Warner agreed to pay a $1.7 billion breakup fee if another company outbids AT&T before the merger is complete.
The deal is certain to prompt strict scrutiny from the Justice Department and the Journal reported is is not expected to close for up to a year. A similar merger between Comcast and NBCUniversal has prompted tough oversight by the federal government to ensure no antitrust laws are violated.
When news of the potential deal first broke on Friday, Time Warner shares closed up 8 percent, at $89.48. AT&T shares fell 3 percent to $37.49.