Leaders of the Progressive Conservatives and the Canadian Alliance announced Thursday morning that an agreement in principle has been reached to merge the two parties.

"Our swords will henceforth be pointed at the Liberals, not at each other," Alliance leader Stephen Harper said at a news conference.

"The result is not only an agreement in principle, it is a principled agreement," Tory Leader Peter MacKay said.

Peter MacKay and Stephen Harper

If the agreement succeeds, it will reunite conservatives 16 years after separating over regional differences.

The right-wing parties would be united under the name The Conservative Party. The two parties will be given until Dec. 12 to ratify the deal.

After months of negotiations, the parties overcame a major stumbling block – how to choose a new leader. Tories have won concessions from the Alliance on the leadership question, getting agreement on a method that gives each riding association equal say in the election. The Tories used it in 1998 when they chose Joe Clark.

Elsie Wayne

A vote would be held on March 21 to select the leader.

The merger needs to be ratified by both parties' caucuses, executives and by general memberships. This could challenge the Conservatives, since such a change would need to be approved by two-thirds of the members.

Potential leadership candidates include former Ontario Premier Mike Harris and two former Tory leadership candidates, Scott Brison and Jim Prentice .

MP Elsie Wayne, who opposed to the merger, says the Canadian Alliance has in essence agreed to rejoin the Conservatives.

"They have agreed to everything, including how to choose a leader, in which every one of our ridings would be treated equally," she said.

Tom Long, who ran for the Alliance leadership in 2000, and was an advisor to Harris, says with a merger deal at hand, both sides will have to bury the hatchet.

"There's a lot of common ground. We've just spent the last 10 to 15 years focusing a microscope on everything we disagree on."

Rick Anderson, the Reform Party's campaign director and a key architect of the unite the right movement which led to the Canadian Alliance, said the new party's focus will have to remain on western Canada.

"I think it would be foolish for the Alliance to walk away form a strong western base. That's not to say it doesn't need to continue expanding in other parts of the country."