European shares ended the day flat, as traders shrugged off some concerns about the condition of Portugal's banking sector.
Sources told CNBC that a Lorillard and Reynolds American merger is weeks away, although the companies have not fully negotiated terms.
European shares closed mixed on Tuesday, after the German benchmark DAX hit an all-time high.
A merger between Reynolds American and Lorillard would have benefits in their domestic market. It could also kick off more deals overseas.
A court ruling to restrict the sale of e-cigarettes in France this week could knock the nascent e-cigarette industry off course.
European equities closed higher on Thursday on euro zone data and a positive handover from Wall Street boosting investor sentiment.
The CEO of Imperial Tobacco Group said 2014 will be a key year for innovation as the group looks at products "adjacent to tobacco".
Alison Cooper, CEO of Imperial Tobacco, talks about innovation and reveals the group has hired the inventor of e-cigarettes.
Alison Cooper, CEO of Imperial Tobacco, says the group's performance was very robust in spite of the tough environment and its "transition" program.
European shares closed sharply lower on Thursday after two different U.S. economic reports were released and as U.S. indexes saw their biggest one-day drops since June.
Traditional tobacco companies need to adapt to the rise of electronic cigarettes - or e-cigarettes - ahead of the product becoming regulated in the U.K., according to an analyst at Berenberg Bank.
Alison Cooper, CEO of Imperial Tobacco, said cigarette and tobacco sales in Germany were "excellent," despite EU weakness.
Alison Cooper, CEO of Imperial Tobacco, highlights the rise of illicit tobacco products following quarterly results and explains why it will continue to lobby the EU.
Banks, retailers and many others may have suffered during Europe's downturn but the tobacco sector has remained rock solid during a time of weak consumer spending.
European shares suffered their biggest daily drop this month after gloomy earnings and weak U.S. economic data hit sentiment on Wednesday and left some positioning for further falls in the near-term.
LONDON, Oct 30- Imperial Tobacco has taken a 1.2 billion-pound writedown on its Spanish business as the impoverished country's smokers turn to cheaper black market cigarettes.
*Carroll exit leaves two female CEOs in FTSE 100. LONDON, Oct 26- Mining giant Anglo American's outgoing chief executive Cynthia Carroll, only the third woman to take the helm of a FTSE 100 company, warned on Friday that calls for quotas to diversify Europe's boardrooms could reduce women to a token presence.
*Nomura cuts Imperial Tobacco Group PLC to reduce from neutral; price. *Nomura raises British American Tobacco PLC price target to 3506 p. Reuters Station users, click. 1580.
CANBERRA, Oct 5- Australia did not infringe tobacco companies' intellectual property rights by forcing them to sell cigarettes in plain packets, Australia's highest court said on Friday, killing off any domestic challenge to the plain-packet ruling. Tobacco giants British American Tobacco, Britain's Imperial Tobacco, Philip Morris and Japan Tobacco.
Oct 2- Imperial Tobacco Group PLC:. *JP Morgan cuts Imperial Tobacco Group PLC price target to 3,067 p from. Reuters Station users, click. 1580.