The PGA Tour and DP World Tour announced on Tuesday that they have merged their commercial operations with the Saudi-backed LIV Golf and ended all litigation, bringing to a close the sport's bitter two-year rift.

In a bombshell agreement that caught the golf world by surprise, the US-based PGA Tour said they had signed an agreement that combines its activities with the Saudi financiers' golf-related businesses and those of the DP World Tour to form "a new collectively owned, for-profit entity".

LIV Golf was launched in October 2021 and lured top PGA Tour talent with record $25 million purses and money guarantees. The competition is currently in its second season.

The PGA Tour responded to the emergence of a rival tour by banning LIV players while the DP World Tour has handed out heavy fines to its players.

The rift had led to a series of lawsuits and caused acrimony between players such as major winners Phil Mickelson and Brooks Koepka, who signed lucrative deals with LIV, and those such as Rory McIlroy and Tiger Woods, who remained loyal to the PGA Tour.

"After two years of disruption and distraction, this is a historic day for the game we all know and love," said PGA Tour commissioner Jay Monahan.

"This transformational partnership recognizes the immeasurable strength of the PGA Tour's history, legacy and pro-competitive model and combines with it the DP World Tour and LIV – including the team golf concept – to create an organization that will benefit golf's players, commercial and charitable partners and fans," he added.

The name of the new merged entity and the precise structure of the tours has yet to be announced but the PGA Tour said that the parties had agreed to "establish a fair and objective process for any players who desire to re-apply for membership with the PGA Tour or the DP World Tour following the completion of the 2023 season".

The Board of Directors of the new commercial entity will have the Saudi Public Investment Fund (PIF) governor Yasir Al-Rumayyan as chairman and Monahan as Chief Executive Officer.

There was noticeably no mention of LIV chief executive Greg Norman in the statements. Norman's combative approach to the conflict had seen him recently snubbed by Augusta National who did not offer him an invite to April's Masters tournament.

In November, McIlroy, who was the most prominent backer of the PGA Tour amongst the players, said that Norman was an obstacle to any deal between the two parties.

"I think Greg needs to go. I think he just needs to exit stage left," said the Northern Irishman, "No one is going to talk unless there's an adult in the room that can actually try to mend fences."

It was unclear if the announcement would impact on LIV's current season. The tour's next event is on June 30 at Valderrama in Spain. The PGA Tour statement said that the team element, introduced by LIV, would be part of the future plans.

"Today is a very exciting day for this special game and the people it touches around the world," said Al-Rumayyan.

"We are proud to partner with the PGA TOUR to leverage PIF's unparallelled success and track record of unlocking value and bringing innovation and global best practices to business and sectors worldwide.

"There is no question that the LIV model has been positively transformative for golf. We believe there are opportunities for the game to evolve while also maintaining its storied history and tradition. This partnership represents the best opportunity to extend and increase the impact of golf for all," he said.

The announcement comes as Saudi football clubs are poised to make a series of major investments, backed by PIF, to sign big-name players.

On Tuesday, Real Madrid's Ballon d'Or winner Karim Benzema signed for Saudi Arabia's Al-Ittihad for three years starting next season, a source in the Jeddah-based club told AFP.

If the move is confirmed, Benzema will join his former Real Madrid teammate Cristiano Ronaldo in the Gulf kingdom after the five-time world player of the year moved to Al Nassr from Manchester United following last year's World Cup.

Saudi Arabia has drawn up a list of more than 10 players who have won either the Champions League or the World Cup that it wants to lure to its league, a source close to the negotiations has told AFP.