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The new company will have more than $28bn in revenue and comprise brands like MTV, Comedy Central and Showtime.
The deal would reunite the two firms, which were previously under the same corporate umbrella until a 2006 split.
The move comes amid an increasingly competitive landscape dominated by Netflix and Disney and other rivals.
The merged firm, to be called ViacomCBS, would be controlled by National Amusements, the holding company owned by billionaire Sumner Redstone and his daughter, Shari.
There have been at least three attempts to re-combine the companies, but all failed due to clashes between executives and investors over who got the top jobs as well as the valuations of the business.
Viacom chief executive Bob Bakish will be the president and chief executive of the combined company. Joe Ianniello, interim chief executive of CBS, will be named chairman and chief of CBS.
The companies said they expected about $500m in annual synergies, or cost savings as a result of the tie-up.
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