TOBACCO giant BAT – one of Southampton’s biggest employers – has agreed a £40.8 billion takeover of US rival Reynolds.

The deal is believed to be one of the biggest ever to involve a British company and will create the largest tobacco firm in the world.

It comes in the same week that company is due to unveil a £4m investment in its Southampton site which will become the home of its Global Supply Network Operation.

BAT, which currently owns 42.2 per cent of Reynolds, will pay 59.64 US dollars (£49.27) per share for the remainder of the company.

This is an improvement on BAT’s first offer of $47 billion (£38.8 billion) made in October.

The offer comprises $25 billion (£20.6 billion) worth of BAT shares and 24.4 billion (£20.1 billion) cash, valuing Reynolds at more than $85 billion (£70.2 million).

The deal will bring together a raft of global brands under one roof, including BAT products Rothmans, Kool, Kent, Lucky Strike and Dunhill with Reynolds’ brands such as Newport, Camel, Pall Mall, Doral, Misty and Capri slims.

Reynolds is the second biggest player in the US market, with three out of the four top-selling cigarette brands.

The US firm has a 34 per cent cigarette market share and has factories in North Carolina and Tennessee.

The companies’ combined earnings will be significant. BAT reported £5 billion in operating profit in 2015, while Reynolds reported pre-tax profits of $6.4 billion (5.3 billion).

BAT has more than 200 brands sold in some 200 markets and employs over 50,000 staff worldwide and claims to sell its brands to one in eight of the world’s one billion smokers. 

The takeover is expected to help BAT gain a further foothold in the US, and give the new company a significant presence in the growing markets of South America, the Middle East and Africa.

BAT says it expects to make at least $400m (£330m) in cost savings in the wake of the merger.

Chief executive Nicandro Durante said: “Our combination with Reynolds will benefit from utilising the best talent from both organisations.

“It will create a stronger, global tobacco and NGP (next generation products) business with direct access for our products across the most attractive markets in the world.”

The huge takeover deal comes just days before BAT unveils its new Global Supply Network Operation based in Southampton.

City mayor, Councillor Cathie McEwing, is due to open the new building at the Millbrook site, the result of a £4m investment.

“Southampton was the obvious centre for this global team as we already had the expertise and capability located here – the team has grown and expanded to become a team of 350 highly skilled individuals,” said a BAT spokesperson.

“This significant investment enables us to provide much needed office space and the best working environment for our Supply Network employees who plan, manage and execute BAT’s supply chain on a daily basis.”

The supply network team source 22,000 different materials, totalling 1bn tonnes per year, from more than 1,000 suppliers which go towards making 200 brands at 45 factories across the world.

BAT’s global research and development lab is already based in Southampton at the site where the firm used to manufacture cigarettes.

The labs are leading BAT’s assault on the growing e-cigarette market and scientists are testing many alternatives to the traditional cigarette. 

The site employs around 1,200 staff – more than when it ceased the manufacture of cigarettes there in 2006 – and is also home to BAT’s global leaf-sourcing department.

When plans for the takeover of Reynolds were first announced a BAT spokesman said that it was “extremely unlikely” to effect the Southampton operation.