British American Tobacco said it had agreed to buy the privately owned Productora Tabacalera de Colombia, the second largest cigarette company in Colombia, for $452m (£277m).
The London-based second biggest cigarette maker in the world said the deal will elevate it to second from third place in Colombia, Latin America's fourth largest cigarette market with total industry sales of around 17bn cigarettes in 2010.
"This investment will strengthen and complement our position in an important market and fill a strategic gap in our Americas region," said Mark Cobben, BAT's director for its Americas region said in a statement.
Protabaco sold 5.5bn cigarettes in 2010, accounting for almost one third of the domestic market. Its biggest brand, Mustang, is the country's second best selling cigarette with a market share of around 18 percent. BAT itself sold 708bn cigarettes in 2010.
BAT said funding for the cash acquisition will be from the group's existing resources.
BAT said the transaction is subject to competition authority approval and final confirmatory due diligence.
BAT was advised by investment bank Rothschild.
City A.M. Reporter