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Reynolds American to buy Lorillard for about $25 bln

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July 15 (Reuters) - Reynolds American Inc said it would buy rival Lorillard Inc for about $25 billion, merging two of the world's biggest cigarette makers amid a slowdown in sales.

Reynolds, whose brands include Camel and Pall Mall, offered $68.88 per Lorillard 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 in a market where sales volume is falling about 4 percent a year as more Americans quit smoking.

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'sMaverick and blu eCigs brands and other assets to Britain's Imperial Tobacco Group for $7.1 billion in cash to address antitrust issues.

British American Tobacco, Reynolds American's largest shareholder, will buy more shares to maintain its 42 percent ownership in Reynolds through a $4.7 billion investment. 

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