Tuesday morning’s announcement of the $27.4 billion acquisition by Reynolds American Inc. (NYSE: RAI) of follow tobacco products maker Lorillard Inc. (NYSE: LO) did not light up investors’ spirits. Shares of both companies’ stocks are traded lower in the premarket session with Lorillard’s stock much the worse off.

Lorillard shares closed at $67.22 Monday and the Reynolds offer is $68.88, a premium of 40.4%, according to Reynolds, since rumors of the deal first surfaced in late February. That may be literally true, but the rumors have dragged on so long that the 2.5% premium to Monday’s closing price feels like no premium at all.

The combined company will become the second-largest U.S. tobacco firm behind Altria Inc. (NYSE: MO). Reynolds’s major brands are Camel and Pall Mall, and these combined with Lorillard’s menthol Newport brand are a more formidable combination facing Altria’s market-leading Marlboro.

Altria controls about 50% of the U.S. tobacco market, compared with 25% for Reynolds and just under 15% for Lorillard. The announced acquisition would essentially create a duopoly in the U.S. tobacco market, and Altria, with a market cap of around $85 billion, would face a competitor with a market cap of around $57 billion.

On a brands basis, however, Altria’s Marlboro commands a whopping 40% of the U.S. market, with Lorillard’s Newport nabbing 12%. And even though Newport cigarettes are a larger brand than Coke Classic, the combined company doesn’t offer a threat to Marlboro’s brand dominance in the United States.

It is worth noting that Reynolds has also reached an agreement with Imperial Tobacco to sell several of its tobacco and its blu e-cigarette brands to the U.K.-based firm for $7.1 billion in cash. Reynolds is trying to avoid a clash with U.S. regulators over the acquisition, but that could require shedding even more assets.

Shares of Lorillard traded down 7% shortly after the opening bell on Tuesday to $62.58, in a 52-week range of $41.56 to $67.46.

Reynolds was down 4% in morning trading, at $60.64 in a 52-week range of $46.55 to $63.39.

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