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AOL, Time Warner Jump After Merrill Report

Influential analyst Henry Blodget had lots of good things to say about the proposed merger between the two.

Shares of

America Online



Time Warner


jumped Wednesday following a bullish report by Henry Blodget, an influential analyst, on the proposed merger between the two.

Reversing a month-long slide, AOL surged 5 11/16, or 11%, to 55 5/16 in midday trading, while Time Warner was up 6 15/16, or 9%, to 80 1/2. (AOL finished up 7 3/8, or 15%, at 57, while Time Warner closed up 3, or 4%, at 76 9/16.)

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From Jan. 10, the day the $150 billion

merger was announced, until the stock market's close on Tuesday, AOL's shares lost 23% of their value while Time Warner dropped 11%.

Blodget, the Internet analyst at

Merrill Lynch

, in his first formal report on the deal, called the proposed merger a "strong, powerful combination."

"If any mega-merger of this size can work, this one can," Blodget wrote, citing the "sensible" approach management is taking to the deal as well as operating synergies between the two, the potential transformation of existing businesses and the potential for rolling out new businesses.

Merrill's 12- to 18-month price target for AOL is $90, while its target for Time Warner is $135. The firm rates both stocks a buy. A Merrill representative said the company has not done any underwriting for AOL but did not know whether the company has worked with Time Warner.

The AOL-Time Warner merger is expected to be completed by the end of the year.