Packages of Newport cigarettes produced by Lorillard are displayed at a tobacco shop on July 11, 2014, in San Francisco. (Justin Sullivan/Getty Images)

Reynolds American has agreed to buy Lorillard, combining two tobacco giants that will together market Newport, Camel, Pall Mall, Grizzly smokeless tobacco and an e-cigarette called Vuse.

At the same time, Reynolds said it would sell some of its brands, including Kool, Salem, Winston and Blu eCigs to Imperial tobacco, making Imperial a major U.S. competitor for the first time.

An announcement by Reynolds American, the parent of R.J. Reynolds, said the deal had been approved by the boards of directors of all companies. Under the cash and stock transaction, Lorillard shareholders will get $50.50 in cash and 0.2909 of a share of Reynolds for each of their shares for a valuation of $68.88 per share based on the closing price Monday.

The deal gives the No. 1 tobacco company, Altria — owner of Philip Morris — a much more formidable competitor. It could also reduce the workforces of the companies and raise cigarette prices.


Camel cigarettes, manufactured by Reynolds American, are displayed at a tobacco shop on July 11, 2014, in San Francisco. (Justin Sullivan/Getty Images)