Altadis rebuffed Imperial's �8bn takeover attempt in April

Imperial said on Wednesday it would pay 50 euros a share for Altadis - an increase from an earlier offer of 47 euros a share which had been rejected.

Altadis had also received a proposal from private equity firm CVC Capital Partners, also worth 50 euros a share.

But Altadis has now said it will back the Imperial deal, in the absence of a higher offer.

IMPERIAL'S BRANDS Lambert & Butler Richmond West Davidoff

The move will join together the world's fourth largest cigarette group, Imperial, and the fifth, Altadis.

The combined firm will close the gap with the world's top three groups: Altria, British American Tobacco and Japan Tobacco.

Imperial said the deal, which would create cost savings of �200m a year, would be partly funded by a new rights issue of up to �5.4bn.

"Imperial Tobacco and Altadis are a great strategic fit, which will consolidate our position as the world's fourth largest international tobacco company," said Imperial chief executive Gareth Davis in a statement.

ALTADIS' BRANDS Gauloises Gitanes Fortuna Montecristo cigars

Speculation about an Imperial-Altadis deal emerged in December 2004, and on 14 March, 2007, Imperial made a cash indicative bid for Altadis at 45 euros a share, which was rejected.

In April, Imperial's improved bid of 47 euros a share - valuing Altadis at about 12bn euros ($16bn; �8.2bn) in all - was also rejected as too low.

Private equity groups CVC Capital Partners and PAI Partners made a 50 euro bid on 4 May. By the end of the month PAI had withdrawn and CVC said was to go ahead alone with the bid.