Shares of media and Internet companies jumped in early U.S. stock market trading this morning on news that America Online Inc. (AOL) had agreed to buy Time Warner Inc. in the biggest takeover ever. Investors speculated that the deal between the No. 1 Internet service provider and the No. 1 media company would spark further combinations between Media and Internet companies. Stocks in both camps moved higher.

The all-stock deal values the world’s biggest media company at around $190 bln and creates an empire that reaches from magazines and movies into cyberspace, the two companies announced. Time Warner shareholders will receive 1.5 shares of AOL Time Warner for each share of Time Warner stock they own while AOL shareholders will receive one share of AOL Time Warner stock for each share of AOL they own. AOL shareholders will hold 55% of the merged company, while Time Warner shareholders will hold 45%, even though AOL’s market capitalization prior to the deal was nearly twice that of Time Warner.