British American Tobacco is planning to merge with its US partner Reynolds in a deal valued at $47bn (£38bn).
BAT wants to buy the 57.8% of Reynolds it does not already own.
The merger would bring together some of the tobacco industry’s best-known brands, including Lucky Strike, Rothmans, Dunhill and Camel cigarettes.
BAT has been a shareholder in Reynolds since 2004 and the company said the merger was “the logical progression in our relationship”.
The FTSE 100 company is offering $20bn in cash and $27bn in shares for the US business. This values Reynolds at $56.50 a share, compared to its closing price of $47.17 on Thursday.
BAT estimates that it can make $400m worth of cost-savings through the merger, which includes assets such as Reynolds’ production facility in Tobaccoville, North Carolina.
The company has not yet held talks with Reynolds and said the merger would have to be approved by all the US company’s independent directors.
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