British American Tobacco attempts to buy back into the resurgent US cigarette market with an unsolicited $47bn offer to acquire the stake in Reynolds American, maker of Camel cigarettes, it does not already own. 

Analysts know that the deal would create the world's largest listed tobacco company by sales, and would return BAT to the US market 12 years after folding its US subsidiary Brown & Williamson - whose troubles the 1999 filmThe Insider were based on - into Reynolds for a large minority stake. 

Reynolds has informally told BAT it is open to a deal, but will need its London-based rival to increase its cash and stock offer, according to people briefed on the negotiations. BAT is said to be ready to moderately increase its tender if needed, said two people briefed on the company's strategy.

After receiving BAT's bid, Reynolds hired Goldman Sachs to help them negotiate a better deal, those people said, while Jones Day is providing legal advice.

The offer is the latest blockbuster consolidation attempt in big tobacco, which has responded to years of legal pressure in the US and the loss of consumer interest in developed markets with a combination of dealmaking to squeeze out costs and new products such as ecigarettes and vaping kits. 

BAT, whose best-known brands are Dunhill and Lucky Strike, has proposed to pay $20bn in cash and the remainder in its stock to acquire the remaining 58 per cent stake in Reynolds, which controls more than a third of the US market. At $56.50 per share, it values the US company at a 20 per cent premium to its closing price in New York on Thursday.

Shares in Reynolds jumped 16 per cent in morning New York trading on Friday to $54.88, giving it a market value of $80bn; BAT was up as much as 5 per cent in early London trading, but gave up its gains after it became clear it would have to pay more. BAT has a market value of £90bn.

By acquiring Reynolds, BAT would be able to consolidate the company's earnings. The US would become BAT's largest market, overtaking its other core operations in regions such as Brazil, eastern Europe, South Africa and Southeast Asia.

Reynolds accounted for about 34.6 per cent of the US market in the third quarter of this year. The brands Newport, Camel, Pall Mall and Natural American Spirit made up almost all of its sales.