Warner Bros Discovery (WBD) has reopened talks with Paramount Skydance, giving the company seven days to table its best and final offer and top an existing agreement with Netflix.

WBD has so far stuck to its binding agreement with Netflix and rejected a series of sweetened offers from Paramount, resulting in the company pursuing a hostile $108.4bn (£76.8bn) takeover directly with shareholders

Last week, WBD said that a senior representative for Paramount had informally told a board member that it would raise its existing $30-a-share offer by $1 if talks were reopened.

On Tuesday, WBD said that it was giving Paramount until 23 February to submit its “best and final offer”.

“To be clear, our board has not determined that your proposal is reasonably likely to result in a transaction that is superior to the Netflix merger,” said the WBD chair, Samuel DiPiazza Jr, and the chief executive, David Zaslav, in a letter to the Paramount board.

“We continue to recommend and remain fully committed to our transaction with Netflix. [However], we welcome the opportunity to engage with you and expeditiously determine whether Paramount Skydance can deliver an actionable, binding proposal that provides superior value.”

To start talks with Paramount, WBD’s board secured a special waiver from Netflix.

Under its merger agreement, Warner Bros can engage with a rival bidder only if the board believes it could lead to a “reasonably superior offer”, triggering a legal loophole that allows limited negotiations despite restrictions on talks.

“While we are confident that our transaction provides superior value and certainty, we recognise the ongoing distraction for WBD stockholders and the broader entertainment industry caused by Paramount Skydance’s antics,” said Netflix.

If Paramount makes a superior offer, Netflix has the right to improve its own bid.

Under the $82.7bn Netflix deal, the streaming company is poised to take control of WBD’s prized assets including Warner Bros, the studio behind franchises including Harry Potter, Superman and Batman, as well as HBO, home to shows including Game of Thrones, The White Lotus and Succession.

The global networks operation – which includes CNN, the Cartoon Network and the Discovery Channel – is not part of the Netflix deal and is poised to be spun off as a separate company in which WBD investors will receive shares.

Last week, Paramount sweetened its offer for the entirety of WBD, saying it would cover a $2.8bn fee owed to Netflix if it pulls out of the deal, and is offering to backstop a multibillion-dollar refinancing to eliminate $1.5bn in costs.

It has also added a “ticking fee” amounting to about $650m in cash each quarter if the deal is not closed by the end of the year.

On Tuesday, WBD set a date of 20 March for shareholders to vote on the Netflix takeover deal.

Paramount, which has backed its offer with a $40bn personal guarantee in equity from Oracle founder Larry Ellison, the father of Paramount chief executive David Ellison, has also said that it would nominate new members to WBD’s board to try to block the Netflix deal.