The formal announcement is likely to be made on Rajinikanth's birthday.
The sequel to Shankar's 2010 blockbuster Enthiran promises to be even bigger.
The film will see Rajinikanth romance British actress Amy Jackson. This will be Amy's second film with Shankar after the Vikram-starrer I.
The director is yet to finalise the villain. His search reportedly led him to Aamir Khan but it did not work out.
Kamal Haasan and Chivan Vikram were rumoured to be approached as well.
Now, it appears that the director's search is over.
Shankar has apparently pitched the idea to Hollywood actor Arnold Schwarzenegger, who was impressed with the script.
Though there were some date issues to be worked out, the team eventually managed to reach a compromise.
The Terminator star is believed to have been offered a whopping Rs 100 crore for the role. But there is no official confirmation yet.
The formal announcement is likely to be made at a press conference, scheduled for Rajinikanth's birthday on December 12.
Produced by Lyca Productions, the film is expected to go on floors early next year.