Reynolds American has agreed to buy rival tobacco company Lorillard for $27.4bn, with Lorillard shareholders set to receive $50.50 in cash and 0.2909 of a share of Reynolds stock for each Lorillard share. Provided the US tobacco market merger is approved, the new company hopes to make some $800m in annual cost savings once it is closed in the first half of next year.To avoid instant rejection by the strict US anti-trust authorities, the two companies have also invited the Imperial Tobacco Group of Great Britain to participate and it will buy the Blu line e-cigarette brand, plus Salem, Winston and Kool and a production facility for just over $7bn.In an ever-complex deal, British American Tobacco (which already owns 42% of Reynolds America) has agreed to invest around $4.7bn in new shares to keep its share constant in the company.According to official government estimates, approximately 18% of adult Americans smoke cigarettes today, against 43% way back in the mid sixties.