CBS and Viacom have reached a deal to reunite media mogul Sumner Redstone's US entertainment empire, betting that a larger company will be able to compete and partner better in a media industry dominated by giants.

The new company will be named ViacomCBS Inc, although CBS shareholders will own 61% and Viacom shareholders will own 39%.

The merger will combine the CBS television network, CBS News, Showtime cable networks with MTV Networks, Nickelodeon, Comedy Central and the Paramount movie studios. Together, they will own more than 140,000 TV episodes and 3,600 film titles. Annually, it is estimated to generate about $28 billion in revenue.

It creates a company with roughly a $30 billion market value, which is still small compared with rivals including Netflix, at $136 billion, ABC network owner Walt Disney, at $245 billion, and NBC owner Comcast at $193 billion.

The merging companies are controlled by National Amusements, the holding company owned by billionaire Sumner Redstone and his daughter, Shari.

"My father once said 'content is king,’ and never has that been more true than today," Shari Redstone said in a statement.

The third attempt at a merger since 2016 is a decisive win for Shari Redstone, whose father built the companies through a series of mergers and then broke them apart 13 years ago.

Previous merger talks had failed because of clashes between executives over divvying up top jobs and the companies’ relative valuation.

The recombination comes amid an increasingly competitive media landscape dominated by Disney and Netflix, prompting Redstone to pursue a merger.

Viacom CEO Bob Bakish will be the president and CEO of the combined company. Joe Ianniello, interim CEO of CBS, will be named chairman and CEO of CBS, which will exclude the Showtime cable network and book publisher Simon & Schuster.

Ianniello will report to Mr Bakish. Mr Bakish cannot fire Mr Ianniello unless the ViacomCBS board approves.

Mr Bakish in an interview said that he will compete with Netflix, Disney and AT&T for subscribers and also create and sell TV shows and movies to other companies, an operation that will grow thanks to the new deal.

"This is not a put-your-eggs-in-one-basket story," Mr Bakish said. "They all work together."

ViacomCBS can lure customers with free offerings from a service like PlutoTV, which it bought in January, then convince them to pay for a subscription service in another part of the empire like CBS All Access, Mr Bakish said.

Viacom shareholders will receive 0.59625 CBS shares for each share they own, representing a slight premium to Viacom’s closing price on Monday.

The companies said they expected about $500 million in annual cost savings.

The new board of directors will consist of 13 members. Six will come from independent members from CBS, four independent members from Viacom, Mr Bakish, and two National Amusements members. Shari Redstone will be appointed the chairman.

Shares of Viacom rose 2.4% to $29.21 and shares of CBS rose 1.4% to $48.70 after the merger was announced.

Centerview Partners LLC and Lazard Frères & Co served as financial advisers to the CBS board’s special committee. Paul, Weiss, Rifkind, Wharton & Garrison LLP served as the special committee’s legal counsel.

LionTree Advisors LLC and Morgan Stanley & Co served as financial advisers and Cravath, Swaine & Moore LLP as legal counsel to the special committee to the Viacom board.

Viacom was advised by Shearman & Sterling LLP. National Amusements was advised by Evercore as its financial adviser and by Cleary Gottlieb Steen & Hamilton LLP as its legal counsel.