(Reuters) - Reynolds American Inc
Reynolds, whose brands include Camel and Pall Mall, offered $68.88 per LORILLARD (LO.NY)share, representing a premium of 2.5 percent to Lorillard's Monday closing.
Lorillard's shares, which have risen about 37 percent since reports in February of a possible deal, were down 5.5 percent at $63.50 before the bell on Tuesday.
Including debt, the deal is valued at $27.4 billion.
The deal gives Reynolds, the second-largest cigarette maker in the United States, the leading U.S. menthol cigarette Newport.
Analysts say deal will help the No. 2 and No. 3 U.S. players compete with Marlboro maker and No. 1 Altria Group Inc
Despite the decline, the United States remains the biggest tobacco market in the world after China and the most profitable.
Reynolds also said it would sell its KOOL, Salem and Winston and Lorillard's Maverick and blu eCigs brands and other assets to Britain's Imperial Tobacco Group
British American Tobacco
(Reporting by Siddharth Cavale in Bangalore; Editing by Saumyadeb Chakrabarty)