GLOBAL tobacco giant BAT, which employs more than 1,000 people in Hampshire, has proposed a multi-billion dollar merger with one if its major rivals to create the world's biggest cigarette firm.

BAT (British American Tobacco) whose research and development centre is based at its former factory site in Southampton, has announced plans to merge with US company Reynolds, whose brands include Camel.

In the deal valued at $47 billion ( £38.3 billion) BAT will offering Reynolds $27billion (£22 billion) worth of shares and $20 billion (£16.3 billion) in cash.

BAT's leading brands include Dunhill, Lucky Strike, Rothmans and Kent, as well as Craven A, Benson & Hedges, Kool, and John Player Gold Leaf. Reynolds is the producer of brands including Newport, Camel, Pall Mall, Doral, Misty, and Capri slims.

The companies' combined earnings could be significant. BAT last year reported £5 billion in operating profit, while Reynolds reported net income of 3.3 billion US dollars (£2.7 billion).

The tobacco industry has been impacted by widespread anti-smoking campaigns, forcing companies to diversify into nicotine replacements and e-cigarettes to meet consumer health concerns.

Reynolds has focused on its own e-cigarette brand, VUS , and other ''smokeless'' tobacco products like snus - which are in-mouth tobacco pouches.

BAT launched e-cigarette brand Vype in the UK in 2013, and has since expanded the product across France, Germany, Italy, Poland and Colombia.

Reynolds warned in a 2016 filing that if its companies ''are not able to develop, produce or market new alternative products profitably, the results of operations, cash flows and financial positions ... could be adversely affected.''

BAT already owns 42.2 per cent of Reynolds' shares which it acquired when its US subsidiary Brown & Williamson merged with RJ Reynolds in 2004.

BAT then pumped $4.7 billion (£3.8 billion) into Reynolds in order to maintain its stake in the company after Reynolds expanded through its acquisition of Lorillard for $27.4 billion in 2014.

A spokesman for the company said the merger was "extremely unlikely" to effect the company's operations in Southamnpton, where it has had a presence for more than a century.

As well as being home to the firm's main research department, its site in Maybush employs staff in IT, distribution and leaf-sourcing.

BAT now employs more people in Southampton than it did when it ceased manufacturing cigarettes in the city in 2006.

Commenting on the merge proposals BAT’s chief executive, Nicandro Durante said: “ The proposed merger of our two great companies is the logical progression in our relationship and offers all shareholders a stake in a stronger, truly global tobacco and Next Generation Products company. BAT is proud of its track record of consistent delivery for shareholders and this transaction would further strengthen that delivery in the future."