British American Tobacco on Tuesday announced that it had agreed terms to buy US rival Reynolds American ending months of negotiations and paving the way for the creation of the world's biggest tobacco company by market value.

In a release on its website, the company said it had increased its offer for the 57.8 per cent of the company that it did not already own to $49.4bn (£40bn) and that the offer had been approved by a committee of independent Reynolds directors established with the purpose of evaluating the BAT offer.

Reynolds shareholders will receive $29.44 in cash and 0.5260 BAT shares for each of their shares under the terms of the deal, representing a 26 per cent premium over the stock's closing price on October 20.

BAT had previously offered $47bn, an offer that was rejected for being too low in November.

The maker of Lucky Strike and Rothman’s cigarettes said that the combined company would have “a balanced presence in high-growth emerging markets and high-profitability developed markets, combined with direct access to the attractive US market.”

BAT said that it expects at least $400m of annualised cost synergies in three years’ time.

“Our combination with Reynolds will benefit from utilising the best talent from both organisations,” said BAT’s chief executive, Nicandro Durante.

“It will create a stronger […] business with direct access for our products across the most attractive markets in the world. We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future,” he added.

Business news: In pictures Show all 13 1 /13 Business news: In pictures Business news: In pictures Flybe collapses Airline Flybe has collapsed. All future flights on the Exeter-based airline have been cancelled – leaving more than 2,300 staff facing an uncertain future, and wrecking the travel plans of hundreds of thousands of passengers. The chief executive, Mark Anderson, said: “Europe’s largest independent regional airline has been unable to overcome significant funding challenges to its business. AFP via Getty Business news: In pictures Future product placement will be 'tailored to individual viewers' Marketing executives say that product placement in films and televison shows on streaming services such as Netflix may be tailored to individuals in future. For instance, if data shows that a viewer is a fan of pepsi, a billboard in the background of a shot would host an advert for pepsi, while for a viewer known to have different tastes it could be for Coca-Cola Paramount Business news: In pictures Corbyn wishes Amazon a happy birthday In a card sent to Amazon CEO Jeff Bezos on the company's 25th birthday, Labour leader Jeremy Corbyn writes: "You owe the British people millions in taxes that pay for the public services that we all rely on. Please pay your fair share" Business news: In pictures No deal, no tariffs The government has announced that it would slash almost all tariffs in the event of a no-deal Brexit. Notable exceptions include cars and meat, which will see tariffs in place to protect British farmers Getty Business news: In pictures Fingerprint payment NatWest is trialling a new bank card that will allow people to touch their hand to the card when paying rather than typing in a PIN number. The card will work by recognising the user's fingerprint NatWest/PA Wire Business news: In pictures Mahabis bust High-end slipper retailer Mahabis has gone into administration. 2 Jan 2019 Mahabis Business news: In pictures Costa Cola Coca-Cola has paid £3.9bn for Costa Coffee. A cafe chain is a new venture for the global soft drinks giant PA Business news: In pictures RIP Payday Loans A funeral procession for payday loans was held in London on September 2. The future of pay day lenders is in doubt after Wonga, Britain's biggest, went into administration on August 30 PA Business news: In pictures Musk irks investors and directors Elon Musk has concluded that Tesla will remain public. Investors and company directors were angry at Musk for tweeting unexpectedly that he was considering taking Tesla private and share prices had taken a tumble in the following weeks Getty Business news: In pictures Jaguar warning Iconic British car maker Jaguar Land Rover warned on July 5, 2018 that a "bad" Brexit deal could jeopardise planned investment of more than $100 billion, upping corporate pressure as the government heads into crucial talks AFP/Getty Business news: In pictures Spotif-IPO Spotify traded publically for the first time on the New York Stock Exchange on Tuesday. However, the company isn't issuing shares, but rather, shares held by Spotify's private investors will be sold AFP/Getty Business news: In pictures French blue passports The deadline to award a contract to make blue British passports after Brexit has been extended by two weeks following a request by bidder De La Rue. The move comes after anger at the announcement British passports would be produced by Franco-Dutch firm Gemalto when De La Rue’s contract ends in July. The British firm said Gemalto was chosen only because it undercut the competition, but the UK company also admitted that it was not the cheapest choice in the tendering process. Business news: In pictures Beast from the east economic impact The Beast from the East wiped £4m off of Flybe’s revenues due to flight cancellations, airport closures and delays, according to the budget airline’s estimates. Flybe said it cancelled 994 flights in the three months to 31 March, compared to 372 in the same period last year.