The Coalition will reunite after Sussan Ley brokered a deal with David Littleproud to bring the Liberals and Nationals back together.

The opposition leader and the Nationals leader will announce the peace deal at a joint press conference in Canberra at 12.30pm on Sunday, reforming the Coalition less than three weeks after a rift over Labor’s hate speech laws split the parties for the second time in eight months.

Ley had given the Nationals until this Monday to reunite with the Liberals before she proceeded with a permanent Liberal-only frontbench that would have cemented the break-up.

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A Liberal source familiar with the negotiations said the two parties would agree to reunite immediately before parliament’s resumption on Monday.

But all of the former Nationals frontbenchers would be suspended from the shadow ministry until March.

Littleproud and the Nationals deputy leader, Kevin Hogan, would still attend shadow cabinet and other senior leadership meetings during the period, even though neither would technically hold frontbench positions.

The deal represents a compromise from both leaders, whose standing among their colleagues has been damaged in the messy saga.

Ley last week offered to reunite with the Nationals but only if the three Nationals senators who crossed the floor on Labor’s hate speech laws – Bridget McKenzie, Susan McDonald and Ross Cadell – served a six-month suspension on the backbench.

But Littleproud, who initially said the Coalition was “untenable” under Ley, was adamant the Nationals had done nothing wrong and therefore shouldn’t be punished.

The Nationals’ position softened late last week, with the party agreeing that all former frontbenchers, not just the three senators, would accept a short suspension.

However, the Nationals wanted to remain apart from the Liberals for the duration of that period.

At the time, multiple Liberal sources, speaking on the condition of anonymity, said the Nationals’ proposal was not being treated as a serious offer and was likely to be rejected unless revised.

The two leaders held further talks on Friday and Saturday to salvage a deal, with Ley briefing the Liberal leadership team about her decision on Saturday night.

Appearing on Nine’s Weekend Today on Sunday morning, Littleproud would not pre-empt an announcement but was hopeful “in the near future, there is a Coalition”.

“Because that’s the only way to bring Anthony Albanese down,” he said.

The prospect of reuniting the Coalition has divided the Liberals and heaped further pressure on Ley as she fights to retain her leadership.

The former Liberal prime minister John Howard and senior conservatives publicly intervened to advocate for a reconciliation, while others – including many moderates – were comfortable with a period of time apart from the Nationals.

The formation of an all-Liberal frontbench would have allowed Ley to promote six MPs to shadow cabinet and a further two to the shadow ministry.

The appointments could have helped bolster her internal positions as conservative rival Angus Taylor weighs a leadership challenge as soon as next week.

In his clearest public statement about his intentions, Taylor said on Friday that he still harboured leadership ambitions but insisted there was “no plan” for a spill next week.

“I’m not going to say to you and your listeners that I don’t have and haven’t had leadership ambitions. I clearly have had [them]. You know, that’s why I ran for the leadership last time around,” he told 2GB.