Paramount is expected to match the price of Warner Bros.’s offer. will increase, will Netflix walk away?

David Ellison’s Paramount Skydance has a Monday deadline to make its best and final offer for Warner Bros. Discovery – and Paramount is expected to come back with an offer above its previous offer of $30 per share for WBD, seeking to outflank Netflix to win the deal.

The board of directors of Warner Bros. Discovery, with Netflix’s permission, has opened a seven-day period to discuss an improved offering with Paramount. That discussion period ends on February 23 at 11:59 PM ET, after teams from both companies have worked over the weekend.

Paramount has declined to comment on its next move. Insiders tell us Variety that Paramount’s revised bid for Warner Bros. Discovery will likely be $32 per share.

How will Netflix respond? After Paramount submits a revised proposal, the streamer has four days to come back with a suitable offer – or leave the M&A drama.

Netflix co-CEO Ted Sarandos, in an interview Friday with Variety‘s Cynthia Littleton declined to say how the streamer would respond to a higher offer from Paramount. But he did say that Netflix has a “rich history” of “being willing to walk away and make someone else pay too much for things.”

“The next step is up to someone else. We have a signed deal with Warner Bros. Discovery,” Sarandos said in the Feb. 20 interview. “If someone wants to get a better deal, which the Warner Bros. Discovery board says hasn’t happened yet, then we’ll see what happens in the future. But let’s not get ahead of that process. And I certainly wouldn’t comment on the bidding strategy anyway. But the bottom line is, you know, we’re super disciplined buyers, as you probably know, we have a reputation for that, so I’m willing to walk away and let someone else overpay for things. We have a rich history of that.”

If Warner Bros. Discovery agrees to accept Paramount Skydance’s higher offer, WBD will have to pay a $2.8 billion termination fee to Netflix. In its latest offer, Paramount said it will foot the bill for that.

On February 17, WBD said it was in discussions with Paramount to “seek clarity” on its “best and final offer.” WBD wanted Paramount Skydance to “clarify your proposal, which we understand will include a WBD per share price in excess of $31,” Warner Bros. CEO David Zaslav wrote. Discovery and chairman Samuel Di Piazza Jr. in a letter to Paramount’s board.

The board of directors of Warner Bros. Discovery cited a message from a “senior representative of PSKY” to an identified member of the WBD board that if the WBD board were to approve merger and acquisition talks, Paramount “would agree to pay $31 per share and that the offer was not PSKY’s ‘best and final’ proposal.” Additionally, WBD set March 20 for the special shareholder meeting to vote on the Netflix deal – which the board said at the time it still recommended investors vote in favor.

“The question now becomes how high PSKY is willing to go – and whether Netflix will exercise its matching rights and also increase its offering,” MoffettNathanson analyst Robert Fishman wrote in a Feb. 20 research note. “In short, we expect PSKY to go to at least $32 per share to put pressure back on NFLX to likely raise its offer to $30 per share.” He added that if Paramount Skydance “really wants to win the bidding war with NFLX, we believe a $34 per share offer will be necessary to avoid an ongoing debate over the value of Discovery’s Global Networks.”

Under Netflix’s current agreement with WBD, the streamer would acquire Warner Bros. studios and streaming businesses. buy for $27.75 per share. WBD shareholders would retain shares in Discovery Global, the company’s proposed spin-off entity, which would include CNN, TBS and other linear networks.

If Netflix were to increase its offer above $30/share, “we will struggle to make the accretion math work,” Fishman wrote. This takes into account rising debts, “likely cannibalization of revenues and necessary cuts in program costs.”

“While we see the longer-term benefits of owning Warner Bros., HBO and HBO Max, we expect NFLX to exit the deal following a disciplined approach if PSKY pushes its offer well above $32 per share,” the MoffettNathanson analyst continued. “We believe it will be difficult for PSKY to win the bidding war for WBD if it decides to take a less aggressive approach during this waiver period, giving NFLX the opportunity to match with a more modest increase over the current bid.”

Meanwhile, Donald Trump — after saying earlier this month that he would not be involved in the review of the Netflix-WB pact — demanded in a social media post on Saturday that Netflix “immediately fire” board member Susan Rice or else “pay the consequences.” Trump quoted a tweet from far-right commentator Laura Loomer, who said Rice, who served as UN ambassador under Obama, was “threatening half the country with weaponized political retaliation from the government.” Loomer also bizarrely claimed that if Netflix were to give Warner Bros. may take over, “positive messages about the Democrats’ upcoming witch hunts against Trump by Barack Hussein Obama and his anti-white racist wife Michelle would likely be broadcast on all streaming services.”

On Monday, Sarandos addressed Trump’s comment. “He likes to do a lot of things on social media,” Sarandos said in an interview with BBC Radio 4. “This is a business deal. It is not a political deal. This deal is managed by the Department of Justice in the US and regulators across Europe and the rest of the world.”

The Justice Department in recent weeks expanded its review of the proposed Netflix-WB deal to investigate whether the combined company would violate antitrust laws governing the entertainment programming market. The DOJ’s Antitrust Division has sent inquiries to independent studios asking whether the acquisition of Warner Bros. by Netflix “may materially diminish competition or tend to create a monopoly in violation of Section 7 of the Clayton Act or Section 2 of the Sherman Act,” according to a copy of one of the letters reviewed by Variety.

Netflix has argued that it does not come close to monopoly control in any market. In one statement Speaking to Bloomberg about the extensive DOJ investigation, lead attorney David Hyman said: “Netflix operates in a highly competitive market. Any claims that it is, or is attempting to be, a monopolist are baseless. We do not have monopoly power nor do we engage in exclusionary behavior and we will happily cooperate, as we always do, with regulators on any concerns they may have.”

On Friday, Paramount said its proposed acquisition of WBD had reached a milestone with the DOJ, following the expiration of the statutory waiting period following Paramount Skydance’s “certification of compliance” with the Justice Department’s second request for information under the Hart-Scott-Rodino antitrust law. Netflix’s Hyman accused Paramount of “misleading shareholders and diverting attention from the facts,” saying that “routine HSR milestones are not a sign of DOJ approval nor that a decision has been made.”