21st Century Fox shares are surging as Wall Street loves the idea of media industry consolidation to compete with Netflix.

CNBC reported Monday that 21st Century Fox has been holding talks to sell most of the company to Disney, leaving behind a media company tightly focused on news and sports, according to people familiar with the situation.

The two sides are not currently talking at this moment, but given the on-again, off-again nature of the talks, they could be revisited, the sources said.

Shares of 21st Century Fox rose 10 percent Monday following the CNBC report, while Disney shares traded up 2 percent. The gains continued on Tuesday with 21st Century Fox up 3.5 percent mid-morning and Disney shares up another 2 percent.

"By combining the library assets and production spend of Disney and Fox, [the] pro forma firm apt to more effectively compete with emerging OTT platforms like Netflix and Amazon," Citi Research analyst Jason Bazinet wrote in a note to clients Monday entitled "Disney + Fox Makes Sense."