US tobacco firm Reynolds American has rejected a $47bn (£37.6bn) takeover offer from British American Tobacco, according to reports.
Citing people familiar with the matter, Bloomberg News said Reynolds is seeking a higher price to merge with BAT, which already owns 42% of the second largest cigarette seller in the US.
The two companies are still in negotiations and BAT is willing to increase its offer "slightly", Bloomberg says.
A merger between Reynolds and BAT would create the world's biggest publicly traded tobacco company ahead of Philip Morris International.
BAT disclosed its intent to buy out the remaining shares of Reynolds with a cash-and-stock offer of $56.50 per share on 21 October — a 20% premium on the US firm's closing price on 20 October.
The FTSE 100 company proposed paying for the merger with $20bn in cash and $27bn in BAT shares and estimated that the deal could create cost savings of around $400m.
BAT owns brands such as Dunhill, Kent, Lucky Strike and Rothmans, while Reynolds owns the Newport and Camel brands in the US.
"We have been a shareholder in Reynolds since its creation in 2004 and have benefitted from its growth in the US market," BAT chief executive Nicandro Durante said last month.
"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."
Reynolds American's share price closed 1% lower in New York at $53.05 on 14 November. It was unchanged in after-hours trading.
BAT has owned a 42% stake in Reynolds American since the latter was founded in 2004 and helped finance the US firm's takeover of Lorillard Tobacco Company last year.