Cigarette maker Reynolds American Inc on Tuesday said it would acquire Conwood Co for US$ 3.5 billion, making a long-anticipated move into the faster-growing smokeless tobacco category.

Conwood, the number 2 player in the smokeless tobacco industry, is owned by Chicago's Pritzker family, which has been looking to liquidate some assets.
Conwood, which makes the Grizzly and Kodiak brands, had 2005 net sales of more than US$ 450 million and operating income of nearly US$ 250 million, Reynolds said.
The deal should add to Reynolds earnings in both the short and long term, Reynolds said.
Analysts have expected both Reynolds and Altria Group, parent of leading cigarette makers Philip Morris USA and Philip Morris International, to get into the smokeless tobacco business, which is growing faster than the cigarette business in the United States.
US consumption of cigarettes has fallen almost every year since hitting a peak of 640 billion cigarettes in 1981, according to the US Department of Agriculture. Consumption fell 2.6 per cent in 2005, to 378 billion cigarettes, the USDA said.
Meanwhile, smokeless tobacco has been growing at 4 per cent to 5 per cent for the past five years, Reynolds said. Number 1 smokeless company UST has also been seen as a possible acquisition target. (pi)