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Tobacco majors Lorillard and Reynolds American near merger

Major tobacco companies Lorillard and Reynolds American may be merging by the end of the month.

Sources told CNBC that the merger is weeks away, although the companies have not fully negotiated terms. Stocks for both firms spiked heavily in the beginning of the day.

Read MoreReynolds, Lorillard in advanced merger talks: Sources

Reuters, in May, reported that Reynolds American was in active discussions to buy Lorillard in a complicated, three-way transaction that could see British American Tobacco take a major role to back a potential merger.

Imperial Tobacco Group was evaluating a deal for assets likely to be divested from Reynolds American and Lorillard if the two U.S. tobacco companies proceed with a proposed combination, Reuters reported last month.

—Reported by CNBC's David Faber, written by Everett Rosenfeld. Reuters contributed to this story.

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