Last month, British American Tobacco offered $47 billion to purchase the roughly 42% stake of R.J. Reynolds American that it didn’t already own. Now, the London-based company’s dream of creating the world’s largest tobacco company has been dashed.

Bloomberg, citing people close to the matter, reports that Reynolds, the maker of cigarette brands like Newport and Camel, rejected BAT’s offer in hopes of receiving a higher bid.

According to sources, the two companies are in talks and BAT will likely increase its offer slightly.

Reynolds first confirmed the takeover possibility in late October, receiving a non-binding proposal to purchase approximately 58% of the company stock that BAT does not currently own.

The North Carolina company said at the time that its board of directors would evaluate the offer and respond accordingly.

BAT — the maker of brands like Lucky Strike and Dunhill — said the offer would consist of $20 billion in cash, and $27 billion in BAT shares.

At the time, BAT said it believed the proposal was a good fit, as it would create “a stronger, truly global tobacco and Next Generation Products (NGP) company.”

The combined group would be the world’s largest listed tobacco and NGP business by net turnover and operating profit with exposure to both cash generative developed and high growth developing markets, BAT said in a statement.

BAT expects the merger to create synergies of around $400 million.

Of course, BAT and Reynolds aren’t exactly strangers, the two companies have been tied together since 2004, when Reynolds bought BAT subsidiary Brown and Williamson Tobacco Corp.

Under the long-standing Governance Agreement between the two companies, the proposed merger must be approved by the independent directors of Reynolds not designated by BAT.

BAT’s merger proposal comes just a year after Reynolds completed its own $27.5 billion acquisition of Lorillard Inc., the company behind Newport cigarettes. As part of that deal, the two companies were required to divest four brands — Salem, Winston, Kool, and Maverick — to Imperial Tobacco Group.

Reynolds American Rejects BAT’s $47 Billion Buyout Offer [Bloomberg]

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