Netflix is closing in on a deal to buy the film and streaming businesses of Warner Bros Discovery, according to multiple reports.
The streaming giant has emerged as the top bidder for Warner Bros ahead of rivals Comcast and Paramount Skydance after offering $28 (£21) per share, according to several outlets including Reuters and the New York Times.
Paramount made an initial bid to buy the whole company, including its cable networks such as CNN, for $24 a share in October which Warner Bros rejected before putting itself up for sale.
Paramount’s lawyers have questioned the “fairness and adequacy” of the sale process this week, in a letter seen by CNBC.
Paramount submitted a renewed bid for closer to $27 a share on Thursday, CNN reported.
Warner Bros owns franchises including Harry Potter and Game of Thrones, and the streaming service HBO Max.
Netflix, Warner Bros and Paramount have been approached for comment.
Emma Wall, chief investment strategist at Hargreaves Lansdown, said the takeover battle was a “drama for people who make drama”.
Speaking to BBC’s Today programme, she said it was key to note the difference between the Paramount and Netflix bids, pointing out that Paramount’s bid included the parts of Warner Bros business that have been “dragging on profitability”.
“Netflix bid is only for parts of the business, and those are the parts of the business that are doing well,” she said.
Ms Wall said Paramount had taken an unusual step of accusing Warner Bros of favouring Netflix in the process. Paramount also said the streaming platform’s offer was not as good a deal for Warner Bros shareholders because it would require the break up of the business.
“You’re sort of tainting your offer if you go into a spat,” she said.
According to CNBC, Paramount’s lawyers accused Warner Bros of undertaking “a myopic process with a predetermined outcome that favors a single bidder”.
Whichever company buys Warner Bros, Ms Wall said the US competition regulator was likely to get involved.
“Whether Netflix is successful in this part bit or indeed paramount comes back for more, this will create a global mega power in broadcast entertainment which the regulator will want to look at,” she said.
Tom Harrington, head of television at Enders Analysis, said it was hard to gauge whether the deal would win regulatory approval, but if it went through it would have a massive impact on cinema.
“Were it to go through it would reorient Hollywood, with a streamer acquiring a business much of which it is existentially the antithesis of – Netflix has always had some limited use for the cinema but generally its offering undermines it,” he said.
Mr Harrington said there was likely to be “big reductions” in television and film output from a merged entity, which would lead to resistance to the move from parts of Hollywood and relevant unions.
“HBO, the creative jewel, would be terribly exposed within Netflix, although it has survived difficult owners for a lot of its existence,” he said.
For consumers, Mr Harrington said a merger was likely to lead to higher costs.
“Netflix would get more expensive and even though HBO Max would be shuttered/become non-essential, the greater penetration of Netflix households would likely mean an increase in total overall subscription revenues.”
