Paramount reportedly prepared to raise bid for Warner Bros. Discovery, pressuring Netflix deal

Update 2/23 [5:07 p.m. ET]: Bloomberg reported on Monday evening that Paramount has officially submitted a new bid to Warner Bros. Discovery. Financial details were not immediately available. This post will be updated.

Paramount is prepared to raise its bid for Warner Bros. Discovery, putting the pressure on Netflix to match a sweetened deal.

According to a report by Todd Spangler and Matt Donnelly in Variety, Paramount is reportedly set to raise its bid for Warner Bros. Discovery from $30 per share to about $32 per share. The improved offer will trigger a matching clause in Netflix’s deal to acquire the storied Hollywood studio. The streamer will then have four days to decide whether or not to improve its offer or walk away from a deal entirely.

Last week, Netflix took the unprecedented step of granting Paramount a 7-day negotiating period with WBD, despite having agreed to purchase WBD’s studio and streaming businesses late last year. Since Netflix and WBD formally announced a deal, Paramount has been posturing for a hostile takeover, encouraging WBD shareholders to tender their shares to its offer, rather than accepting the board-recommended Netflix deal. Paramount is also preparing to nominate its own slate of directors at next month’s shareholder meeting.

Officially, Paramount has until Monday night to submit a higher offer.

It’s unclear if Netflix would respond to Paramount’s offer with a sweetened deal of its own. Last week, Netflix CEO Ted Sarandos pointed to the company’s history as a disciplined buyer willing to walk away if the price gets too high.

“We’re super-disciplined buyers, as you probably know, we have a reputation for such so that I’m willing to walk away and let someone else overpay for things. We have a rich history of that,” Sarandos told Variety on Friday.

Should Netflix choose not to match, WBD would owe the streamer a $2.8 billion breakup fee. As part of previous takeover offers, Paramount has pledged to cover the breakup costs.

A $32-per-share offer from Paramount could fall in a tricky middle ground for Netflix, whose current deal pays WBD shareholders $27.75 per share, plus equity in the Discovery Global stub entity, which will include cable assets like CNN and TNT Sports. Currently, the streamer and WBD’s board assert that $27.75, plus the Discovery Global equity, exceeds the $ 30-per-share offer that Paramount has proposed for the entirety of WBD.

If Paramount goes to $32 per share, Netflix would likely have to up its bid into the $30 range to compete. Investors have already responded negatively to Netflix’s current deal, with its stock taking a dramatic dip since the deal was announced last year. An increase in its bid could send the stock plummeting further.

However, analysts from MoffettNathanson believe that Paramount would have to raise its bid into the $34 range if it “truly wants to win the bidding war with Netflix.” The same analysts, however, believe Paramount will have difficulty winning WBD if it takes a more conservative approach around $32.

Whether Netflix decides to improve its bid or walk away will ultimately decide the fate of TNT Sports and its wide-ranging sports portfolio. Should Netflix win, TNT Sports will be spun off into Discovery Global along with WBD’s other cable assets. That company would presumably be ripe for acquisition. If Paramount wins, TNT Sports would combine with CBS Sports to create one of the most formidable portfolios of live sports rights in the country.