By Ian Walker

LONDON-- British American Tobacco PLC on Tuesday said it had agreed to pay $49.4 billion for the 57.8% of Reynolds American Inc. that it doesn't already own.

BAT is paying $29.44 in cash and 0.5260 of an ordinary share for the stake, valuing its U.S. peer at more than $85 billion.

The deal comes after BAT said in October that it had made an offer for Reynolds valued at $56.50 a share, or about $47 billion for the stake it didn't own.

The British firm, which houses Dunhill, Lucky Strike and Pall Mall among its brands, expects at least $400 million cost savings from the deal, which is expected to benefit both earnings and dividends in the first year.

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

January 17, 2017 02:42 ET (07:42 GMT)

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