U.S. Markets closed

Japan Tobacco agrees to buy brand rights from Reynolds American for $5 bln

* JT to buy non-U.S. rights to Natural American Spirit

* Purchase to expand JT's premium tobacco range

* Deal to allow Reynolds American to focus on U.S.

(Recasts, adds comments from Japan Tobacco, context)

Sept 29 (Reuters) - Japan Tobacco Inc has agreed to pay 600 billion yen ($5 billion) in cash for Reynolds American Inc's Natural American Spirit tobacco business outside the United States, the two companies said in separate statements on Tuesday.

The deal, to be concluded by early 2016 pending regulatory approval, includes related trademarks and subsidiaries primarily in Japan and Europe, where operations will continue unchanged, Japan Tobacco said. (http://bit.ly/1ODQ2zd)

The former state monopoly, still 33.4 percent owned by the Japanese government, has been expanding since privatization in 1994. It bought the non-U.S. tobacco business of RJR Nabisco Inc for around $7.8 billion in 1999 and British peer Gallaher Plc for about $18.8 billion in 2007.

Its latest deal will help in its pursuit of Philip Morris International Inc and British American Tobacco Plc to become the world's biggest cigarette maker.

The company said Japan accounts for the majority of Natural American Spirit's sales volume outside the United States, with smokers mainly in their 20s and 30s. Buying the premium brand would extend Japan Tobacco's product line-up, President and Chief Executive Officer Mitsuomi Koizumi said.

Koizumi's counterpart at Reynolds American, Susan M. Cameron, said Natural American Spirit would benefit from a sale to a global company such as Japan Tobacco, rather than Reynolds American investing to support the brand internationally.

Cameron also said the sale will allow Reynolds American to focus on the United States, as all international rights to its cigarette trademarks will be owned by international tobacco companies. Its Camel and Winston brands are also owned abroad by Japan Tobacco.

Reynolds American hired JP Morgan Securities and Lazard as financial advisors, and Jones Day as legal advisor. A spokesman at Japan Tobacco, which did not elaborate on financial details, said the company will use cash on hand and bank loans. ($1 = 119.9500 yen) (Reporting by Subrat Patnaik in Bengaluru and Christopher Cushing in Tokyo; Editing by Savio D'Souza and David Holmes)