tobacco cigarette shake up bat american group dunhill reynold Lucky Strike, Pall Mall and Rothmans
A general view shows the British American Tobacco offices in London, Britain October 21, 2016. The world's second-largest tobacco group and owner of cigarette brands such as Lucky Strike, Pall Mall and Rothmans cigarettes, has offered to buy America's second-largest cigarette maker Reynolds for $47 billion at $56.50 per share in a cash-and-share deal. Reynolds is yet to respond to the offer.Reuters file

British American Tobacco (BAT), the world's second-biggest tobacco group, has made a premium offer of $47 billion to acquire the remaining 58 percent stake in America's second-largest cigarette company Reynolds. The offer of $56.50 per share to Reynolds's investors is about 20 percent more to BAT's closing price of £46.66 on Friday on the London Stock Exchange. 

"The proposed merger of our two great companies is the logical progression in our relationship. It offers all shareholders a stake in a stronger, truly global tobacco and next-generation products company," Nicandro Durante, BAT's chief executive of BAT was quoted as saying by The Telegraph.

The BAT offer to Reynolds's investors consists of $24.13 in cash and $32.37 in shares.

If the deal goes through, it would create the world's largest cigarette company.

BAT's cigarette brands include Dunhill, Benson & Hedges, Kent, Lucky Strike, Pall Mall and Rothmans, while Reynolds American owns Newport, Camel and Pall Mall.

BAT's 2015 revenues (after deducting duty, excise and other taxes) stood at £13,104 million and the company sold 663 billion cigarettes in more than 200 markets globally last year. 

America is the second-largest cigarette market after China and the deal will enable BAT to consolidate its business in the lucrative market where Reynolds already has 35 percent market share.

The combined valuation of BAT, presuming the deal goes though, would be about £157 billion, reported The Guardian. An analyst told the publication that the proposed merger was ideal for BAT.

The offer made "perfect sense, pivoting BAT further towards the high-value US market, consolidating some strong brands and Reynolds' position in next-generation tobacco," Guy Ellison, the head of UK equities at Investec Wealth & Investment, said.

Globally, about 5,600 billion cigarettes are sold every year, estimated at £450-£500 billion, according to BAT. Awareness about the harmful effects of cigarette smoking is leading to a decline in volume sales in developed countries, but the dynamics of demographic profile and lifestyle in emerging countries augurs well for cigarette makers.

Cigarette companies in China's neighbouring country India include ITC, Godfrey Phillips and VST Industries.