British American Tobacco (BAT) is bidding $47 billion US to buy the remaining shares it does not already own of Reynolds American Inc.
The logic of the deal, analysts say, is to make up for a decline in smoking in the firms' home markets of the U.S. and Britain as they look to developing countries and new products, such as electronic cigarettes.
The London-based company offered to buy the 57.8 per cent of Reynolds it doesn't already own for the equivalent of $56.50 per share, 20 per cent more than Thursday's closing price. Investors would receive $24.13 in cash and 0.5502 of a BAT share for each Reynolds share they own.
Imperial Tobacco is the largest in Canada, but ranks fourth in the world. Phillip Morris is the largest with BAT and Reynolds in second and third positions before this deal.
But in Canada, more than half the market is being captured by black-market cigarettes.