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British cigarette maker Imperial Tobacco has agreed to buy Franco-Spanish rival Altadis in a deal worth €16.2 billion (£11.0 billion).

Altadis has confirmed that it is recommending the €50 (£34) a share offer to its investors, having previously rejected an earlier approach made by Imperial in March.

Imperial said that its latest offer represented a 32 per cent premium on Altadis' closing share price on March 12th, two days before it made the previous bid.

The new approach also matches a €50 per share offer made for Altadis by private equity firm CVC Capital Partners, which lost its bidding partner PAI Partners after making the May bid.

However Altadis has said that it will stick with the latest Imperial offer in the absence of a higher bid.

Imperial claims that the deal will generate operational efficiencies of around €300 million (£200 million) a year and consolidate its position as the world's fourth largest international tobacco company.

Analysts say the planned merger between Imperial and Altadis comes as tobacco manufacturers in Europe are increasingly seeking to reduce operating costs in the wake of the introduction of public smoking bans in some countries.

Commenting on the proposed sale, Imperial chief executive Gareth Davis said: "This deal significantly enhances our operating platform and scale with an increased presence in profitable mature markets and improved emerging market opportunities."

Imperial, which manufactures Lambert & Butler and Richmond cigarettes in the UK, is hoping that in addition to expanding its portfolio of tobacco brands, it will be able to boost its presence in the US market through Altadis' "prestigious" cigar business.

The company plans to partly fund the acquisition through a new rights issue of up to £5.4 billion.