Cigarette-maker Reynolds American confirmed on Friday that it's in talks to buy smaller rival Lorillard, following months of speculation about a potential deal. The merger would require approval by London-based British American Tobacco, as it owns 42% of Reynolds American. Reynolds said on Friday that British American Tobacco is involved in the discussions and expects to support it. A combination of the two companies stands to largely change the landscape of the tobacco industry. Imperial Tobacco Group said it was in talks to buy some Reynolds and Lorillard brands if the merger occurs. It would also put pressure on Philip Morris USA, a division of Altria, which is the largest U.S. tobacco maker.

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