Japan Tobacco Inc said it would buy Reynolds American Inc's Santa Fe Natural Tobacco units outside the United States for about $5 billion, giving it the rights to the Natural American Spirit brand.
Santa Fe will continue to own the rights to the brand – marketed as additive-free and popular among younger smokers – in the United States.
Japan Tobacco (JT), which already holds international rights to Reynolds' Winston and Camel, said Santa Fe's international units employ about 280 people, mainly in Europe and Japan.
The deal will help JT in its pursuit to become the world's biggest cigarette maker, overtaking first and second-ranked Philip Morris International and British American Tobacco.
For Reynolds, the deal will allow the company to focus on growing its brands in the United States, Chief Executive Susan Cameron said in a statement.
The Natural American Spirit brand has enjoyed strong growth in the United States, Japan, Germany, Switzerland, Italy, Spain, the UK, among other markets, JT said.
Santa Fe's share of the U.S. cigarette market grew from 1.4 percent share in 2013 to 1.6 percent in 2014, according to IRI/Capstone. Santa Fe reported sales of $658 million in 2014.
JT and Reynolds are working to get regulatory approvals for the deal by early 2016.
Bloomberg first reported about the possibility of the deal on Sept 24.
J.P. Morgan Securities LLC and Lazard are Reynolds American's financial advisers and Jones Day its legal adviser.
Up to Monday's close of $43.42, Reynolds' stock had risen about 35 percent this year.