AOL Inc. is buying Time Warner Inc. for $6.8 billion in cash and stock, the company announced on Thursday.
The transaction will give the entertainment company control of the nation’s second-largest online news and entertainment company.
AOL shares rose 2% in premarket trading on the Nasdaq.
Tim Cook, AOL’s chief executive, called the deal “a game-changer for our business, our people and our audiences.”
The purchase price includes $3.3 billion in AOL shares, according to people familiar with the matter.
Time Warner shares rose 3% in midday trading.
Tim Hunt, a Time Warner spokesman, declined to comment.
Tim Armstrong, AOL chief executive for more than 10 years, said he expects the transaction to benefit AOL from its existing portfolio of media assets.
“AOL will continue to have the ability to shape the future of our company and our products,” Armstrong said in a statement.
“We look forward to partnering with Tim and his team to help us achieve our vision of delivering the best news and content in the world for our customers.”
Time Warner, based in New York, is one of the biggest media companies in the U.S. AOL was founded in 1996 by former AOL executive John McAfee.
It offers a suite of news and information sites including AOL News and AOL News Digest, as well as online video service Hulu.
AOL’s news and digital products have become popular with consumers in recent years as their services have become more affordable and convenient.
The company’s Web site for iPhone and iPad users, which is owned by Apple Inc., has a subscriber base of about 400 million people.
Time-Warner has about 1.5 billion subscribers.
Apple’s Web platform is widely considered the best in the industry.
Time’s business has also been affected by the recent changes to the rules governing online advertising.
Advertising companies say they are losing business to other platforms such as Amazon and Google Inc. Tim Bell, a former AOL chief financial officer, said the purchase of AOL is a “big deal” for Time Warner.
He noted that the company has invested in its Web properties, which are owned by Time Warner’s parent company, Time Warner Cable Inc. He said AOL’s assets have historically been in digital news and news products.
AOL has struggled with the shift to online advertising as people increasingly use smartphones to read and search on the Web.
TimeWarner’s Web sites, including the AOL News site, have been popular with people who subscribe to pay TV, Bell said.
Time has spent billions of dollars to upgrade its network and add video and audio capabilities.
AOL did not immediately respond to a request for comment.