Reynolds American Inc (RAI) confirmed it is exploring a takeover of Lorillard and, in a separate statement, Imperial Tobacco said it is talking to the two cigarette makers about acquiring unspecified assets and brands.

"British American Tobacco (BAT), RAI’s largest shareholder, is participating in these discussions", RAI said. "If the transaction proceeds, BAT expects to support the transaction by subscribing for additional shares RAI and would maintain its existing 42 per cent equity position in RAI."
UK-based Imperial said it was in talks with RAI and Lorillard. "Imperial would proceed with an acquisition only if its terms met strict transaction criteria. There can be no certainty as to the terms upon which any acquisition or related debt financing may be agreed or whether any transaction will take place," Imperial said.
Lorillard, which also confirmed the talks in a brief statement, makes Newport, the best selling menthol cigarette in the US. Camel and Pall Mall are major brands at RJ Reynolds Tobacco, the largest RAI tobacco subsidiary.