Paramount Skydance is working with an investment bank as it prepares an offer for Warner Bros. Discovery, according to people familiar with the matter.

Warner Bros. Discovery had yet to receive an offer as of Thursday, according to people familiar with the matter, who spoke on the condition of anonymity to discuss nonpublic dealings. A bid could come as early as next week, CNBC's David Faber reported Thursday.

Shares of Warner Bros. Discovery soared more than 25% on Thursday after an initial report from the the Wall Street Journal that the recently merged Paramount Skydance was preparing a takeover bid.

Representatives for Paramount and Warner Bros. Discovery declined to comment.

Shares of Paramount Skydance were up roughly 8% in afternoon trading.

Warner Bros. Discovery recently announced plans to separate its global TV networks business from its streaming business and studios. The Journal reported Thursday the Paramount Skydance bid would be an all-cash offer for the entirety of WBD.

Earlier this week, WBD CEO David Zaslav said at an investor conference that the planned separation would likely be completed by April. The streaming and studio assets would be renamed Warner Bros., while the global TV networks business — which will own a suite of pay TV networks including TNT and CNN — will be Discovery Global.

While WBD executives said in June that each company would be "free and clear" to do deals following the split, a bid before the separation would have to be for the entire company, one of the people said.

Media moves

David Ellison, CEO of Skydance Media attends the 81st Annual Golden Globe Awards at The Beverly Hilton on Jan. 7, 2024 in Beverly Hills, California.

Kevin Winter | The Hollywood Reporter | Getty Images

The media industry has been navigating a transformation as streaming has upended the pay TV bundle, a longtime cash cow for TV and entertainment companies.

A merger between Paramount Skydance and Warner Bros. Discovery would create a media behemoth with a huge portfolio of pay TV networks, a sprawling range of sports rights and two major film studios.

Paramount Skydance owns broadcast network CBS, as well as pay TV networks like BET, MTV and Nickelodeon, and streaming service Paramount+. Its film studio is known for movies like "The Godfather," "Top Gun," and "Forrest Gump."

With the exception of a broadcast TV network, WBD has similar assets — with networks like CNN and TNT, as well as HBO and streaming service HBO Max. Its Warner Bros. film studio also has a historic track record, and owns the intellectual property to franchises like "Harry Potter," DC Comics and "The Lord of the Rings."

Both companies have a long list of major sports rights, too, the marquee content for all traditional TV and streaming platforms. A merger would put the likes of the NFL, MLB, an array of college football and basketball, and other major sports under one roof.

Media executives and experts have expected consolidation could be coming to the industry.

Zaslav has said publicly for some time that media companies need to consolidate. During an earnings call in November, shortly after Donald Trump was elected as president, Zaslav said a new administration could usher in more dealmaking.

However, in recent months, some media companies have moved toward separation. Late last year, Comcast announced that its NBCUniversal would spin off its pay TV networks, which includes CNBC and MSNBC, into a separate, publicly traded entity. Months later, WBD announced it would make the same move.

Paramount Skydance is the result of an $8 billion merger that was announced last year and received regulatory approval in August to move forward after a lengthy delay.

The Federal Communications Commission cleared the way for the merger weeks after Paramount agreed to pay $16 million to Trump to settle a lawsuit he filed against the company over the editing of an interview on CBS's "60 Minutes" with former Vice President Kamala Harris.

At the time of deal's approval, FCC Chairman Brendan Carr said in a statement that he welcomed "Skydance's commitment to make significant changes at the once storied CBS broadcast network."

The company is looking to cut more than $2 billion in costs, and layoffs are expected to continue. Last week, Paramount SKydance sent a memo to its employees saying they were expected to return to the office five days a week in the new year, or seek a buyout.

A lot has changed since the merger, which was backed by RedBird Capital Partners. The company has done a slew of deals under the leadership of David Ellison, son of Oracle founder and multibillionaire Larry Ellison, including acquiring the U.S. rights to TKO Group's UFC for seven years, beginning in 2026.

On Wednesday, Larry Ellison became more than $100 billion richer after software company Oracle issued growth projections that dramatically lifted the company's stock.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.