BAT increased the cash element of a cash-and-share bid for the 58% of Reynolds that it does not already own.
The new offer values each Reynolds share at $59.64 (€55.83), the London-based company said, about 5.6% more than the $56.50 (€52.89) it proposed last October.
Hammering out the terms of an improved deal has been a slow process, complicated by uncertainty created by Donald Trump’s election.
With agreement in place, the companies can move forward with a combination that marks the latest stage in a wave of consolidation for the tobacco industry, which is struggling with shrinking demand for traditional cigarettes and an uncertain pathway to new, potentially less harmful technologies.
“The market will be relieved that they have got the deal over the line,” said Richard Marwood, a fund manager at Royal London Asset Management whose assets include BAT shares.
“People were starting to worry that the negotiations might break down.”
The UK company said it’s offering $29.44 (€27.56) in cash and 0.526 of a BAT share for each Reynolds share, pushing the cash element up from $24.13 (€22.59).
The increase partly reflects a drop in the sterling-dollar rate since BAT made its initial proposal, said Chris Wickham, an analyst at Whitman Howard.