By Greg Roumeliotis and Jessica Toonkel
NEW YORK (Reuters) - AT&T Inc <T.N> is set to announce as early as Saturday an $85 billion deal to buy Time Warner Inc <TWX.N>, sources familiar with the matter said, giving the telecom company control of cable TV channels HBO and CNN, film studio Warner Bros and other coveted media assets.
The deal would be the biggest merger in the world this year and one of the largest in recent years in the sector. Telecommunications companies have been looking for quality content to stream over their high-speed networks, hoping to attract a growing group of viewers who want to ditch traditional pay-TV packages in favor of streamlined offerings or watching online.
AT&T will pay $110 per Time Warner share, half in cash and half in stock, worth about $85 billion overall, sources told Reuters. It will need to line up financing to pay for the deal, since it only has $7.2 billion in cash on hand. This could put pressure on its credit rating as it already had $120 billion in net debt as of June 30, according to Moody's.
The boards of the two companies were meeting on Saturday to approve the deal, sources told Reuters.
A deal would likely face intense scrutiny by U.S. antitrust regulators. The government may worry that other cable and internet companies would be denied access to Time Warner content like HBO and CNN, said Andre Barlow, an antitrust lawyer at the law firm Doyle, Barlow & Mazard.
U.S. Republican presidential nominee Donald Trump, who has complained about what he sees as unfair coverage of his campaign, said at a rally on Saturday he would block any AT&T-Time Warner deal if he wins the Nov. 8 election.
"It's too much concentration of power in the hands of too few," Trump said.
CONTENT PLUS DELIVERY
AT&T, whose main wireless phone and broadband service business is showing signs of slowing, has already made moves to turn itself into a media powerhouse. It bought satellite TV provider DirecTV last year for $48.5 billion.
In 2014, AT&T entered a joint venture, Otter Media, with the Chernin Group to invest in media businesses, and it has rolled out video streaming services.
Time Warner is a major force in movies, TV and video games. Its assets include the HBO, CNN, TBS and TNT networks as well as the Warner Bros film studio, producer of the “Batman” and “Harry Potter” film franchises. The company also owns a 10 percent stake in video streaming site Hulu.
Time Warner Chief Executive Officer Jeff Bewkes rejected an $80 billion offer from Twenty-First Century Fox Inc <FOXA.O> in 2014, but sources said on Friday that the former suitor had no plans to renew its bid.
The Wall Street Journal reported on Friday that Apple Inc <AAPL.O> approached Time Warner a few months ago about a possible merger.
Owning more content gives cable and telecom companies bargaining leverage with other content companies as customers demand smaller, hand-picked cable offerings or switch to watching online. New mobile technology including next-generation 5G networks could make a content tie-up especially attractive for wireless providers.
"We think 5G mobile is coming, we think 5G mobile is an epic game-changer," Rich Tullo, director of research at Albert Fried & Company, said in a research note, adding that mobile providers would be in position to disrupt traditional pay-TV services.
A previous Time Warner blockbuster deal, its 2000 merger with AOL, is now considered one of the most ill-advised corporate marriages on record.
Dallas-based AT&T and New York-based Time Warner did not immediately return calls for comment.
(Additional reporting by David Shepardson and Liana Baker; Editing by Bill Rigby and David Gregorio)