CIGARETTE firm British American Tobacco saw profits rocket to £2.11bn during a year in which it axed 490 jobs at its plant in Darlington.

The company ruthlessly announced it was shifting production from the North-East to Southampton, it claimed due to pressures of harsh competition in world markets.

But the firm proved yesterday it had the money to carry out a cunning trick that could safeguard it from costly legal writs.

BAT unveiled plans to merge its US business Brown & Williamson into a new company holding 30 per cent of the nation's cigarettes market.

The tie-up with RJ Reynolds Tobacco should create the sector's second largest company in the US, with volumes of 135bn cigarettes.

The US is the most important cigarette market in the world. But it is gripped by a number of billion-dollar lawsuits lodged by cancer suffering smokers and ex-smokers which could prove enormously costly for manufacturers.

Brown & Williamson was believed to be potentially in line for a $17bn share of the total Florida $145bn US tobacco industry potential writs.

The BAT deal will transfer litigation liabilities to the newly formed company.

Shares in BAT surged ahead 77.5p to 720p.