Reynolds American is 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, according to people familiar with the matter.
The proposed deal, which is in its late stages of talks, would combine the second and third-largest U.S. tobacco companies, putting brands such as Reynolds' Camel and Lorillard's Newport under one roof.
The companies are working to finalize an agreement as soon as in a matter of weeks but the talks could still take longer given the complex structure, the people said, asking not to be named because the matter is not public.
Reynolds, in which British American Tobacco (BAT) has a 42 percent stake, has a market capitalization of $31 billion, while Lorillard has a market capitalization of $21 billion.
All the people asked not to be named because they were not authorized to speak with the media. Representatives for Reynolds and BAT declined to comment. Lorillard could not be immediately reached for comment.