AOL Shares Surge on Report of Rejected Buyout

America Online Inc. shares surged 5.5% on Wednesday after a Financial Times report that the online service rejected a buyout bid from AT&T; Corp., the largest U.S. long-distance phone company.

The newspaper, citing sources close to the companies, said the bid would have been “comfortably” above AOL’s market value, which was about $19 billion at Tuesday’s closing prices.

Analysts doubt AOL would consider selling for less than $130 a share, or $28 billion, and it could fetch up to $32 billion.

Both AOL and AT&T; declined to comment on the report.

Analysts expect Internet companies to be snapped up by buyers because of the huge numbers of consumers they reach.

Time Warner Inc. and Walt Disney Co., entertainment companies that are struggling to reach a wide audience via the information highway, have been named as potential bidders for America Online, which has more than 12 million subscribers.

But attractive as AOL might be, analysts said it’s unlikely that Disney or Time Warner would be willing to pony up $32 billion for it.

AOL is seen as an unlikely seller. The company enjoys the role of industry leader and would probably lose some of its entrepreneurial fire in a traditional telecommunications giant such as AT&T;, analysts said.

If AOL Chief Executive Steve Case does decide to sell AOL, he would be more likely to align with an entrepreneurial company such as WorldCom Inc., analysts said.

For AT&T;, the challenge is to quickly boost its presence in the fast-growing Internet market to offset declines in its core long-distance operations.

AOL shares jumped $4.88 to close at $93.88 after touching a record $95. AT&T; rose $1.06 to close at $63. Both trade on the New York Stock Exchange.

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Bloomberg News and Reuters were used in compiling this report.