Reynolds American has stubbed out a $47bn (£37.8bn) takeover offer from British American Tobacco (BAT) because the price is too low, according to reports.
BAT, which already holds a 42 per cent stake in Reynolds, sought to snap up the remaining 58 per cent in the Camel and Pall Mall cigarette producer last month. The tie-up would also open a valuable door for BAT into the US marketplace.
Sources told Bloomberg, which first reported the news late last night, the two tobacco giants were still in talks, even though there were quibbles over price, and BAT may be willing to increase its offer of $56.50 per share for a cash and shares deal.
The deal currently being debated represented a 20 per cent premium on Reynold's shares at the time the offer was made. BAT has also previously said it could make $400m in savings if the deal goes ahead successfully.
That being said, credits rating agency Fitch last month put its rating for BAT on negative watch, on the grounds the debt the company would be required to take on to fund the deal would be hefty.
BAT declined to comment. Reynolds has not responded to City A.M.'s request for comment.
New York-listed shares in Reynolds are currently trading up 0.6 per cent at $53.68. Meanwhile, shares in FTSE 100-listed BAT closed up 0.5 per cent at 4,300.5p.
This October was one of the biggest on record for global mergers and acquisitions activity. As well as the proposed BAT and Reynolds deal, that was also the month AT&T's $108bn takeover deal with Time Warner and Qualcomm's purchase of Dutch rival NXP were announced.