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BAT will purchase the 57.8-per cent of Reynolds American that it does not already own, BAT said, unveiling an improved cash-and-shares offer after the US giant had rejected its previous $47-billion bid.
The deal brings together a raft of global brands, including BAT products Lucky Strike, Rothmans and Kent, and Reynolds' brands such as Newport, Camel and Pall Mall.
The combined company will have a strong foothold in the United States, and a significant presence in high-growth markets including South America, the Middle East and Africa.
BAT added it would also create a "truly global" business for fast-growing next generation products (NGP) like e-cigarettes or vaping.
He added that the blockbuster deal "will create a stronger, global tobacco and NGP business with direct access for our products across the most attractive markets in the world".
"We believe this will drive continued, sustainable profit growth and returns for shareholders long into the future."
Reynolds shareholders will receive $29.44 in cash and 0.5260 BAT ordinary shares, under the terms of the transaction.
That represented an increase of 26 per cent compared with the closing Reynolds share price on October 20 — the day before BAT's unsuccesful bid.
BAT forecasts that it will make at least $400 million in annualised cost savings following the purchase, while the deal remains subject to shareholder and regulatory approvals.
The London-listed firm plans to expand further in the vaping and e-cigarette market — where it is already the largest international company outside the US — adding Reynolds' popular Vuse vapour brand to its portfolio.
Major global tobacco companies are smoking out emerging markets to offset sliding demand in Western Europe, where high taxes, public smoking bans and health worries have persuaded many people to give up or turn to e-cigarettes, battery-powered devices that heat a nicotine liquid.
The world's biggest cigarette producer by market share is the state-owned China National Tobacco Corporation, followed by Marlboro maker Philip Morris International.
However, BAT says the Reynolds deal will create the biggest listed tobacco firm by net turnover and operating profit.
Reynolds is the second biggest player in the US market and has three out of the four top-selling cigarette brands.