Imperial Brands, the world's fourth-biggest tobacco company, is accelerating its cost-savings drive and pouring some of the benefits into marketing key brands as it faces the prospect of a greatly enlarged competitor.
The maker of Winston, Gauloises and other cigarettes said it plans to spend £750m over the next three years to make the business more streamlined and efficient.
The effort should result in additional savings of £300m each year by 2020.
Imperial also said it would spend £300m this year on growth opportunities in some of its top markets.
But spending more will dent its profit, taking 2017 earnings growth below its medium-term target of 4-8%. It should return to growth in that range from 2018, it said.
The increased investment comes as larger rival British American Tobacco has proposed a $47 billion buyout of Reynolds American, which would make it the biggest international tobacco company.
The deal could also spark further deals in an industry that is shrinking as more people quit smoking.
Imperial got a boost last year from its $7 billion purchase of some Reynolds' brands. The move sharply increased its exposure to the lucrative US market.
"We're building a stronger high-quality business," the company's chief executive Alison Cooper said.
The weak British pound should benefit earnings by around 14% in the 2017 financial year, the UK-based company said, since the vast majority of its profits come from overseas.
The company said it remains committed to raising its dividend by at least 10%.
For the just-ended financial year, Imperial reported higher adjusted sales and profit, helped by the acquisition of brands in the US and a weaker sterling.
The company said net revenue of its tobacco business rose 9.7% to £7.17 billion. Adjusted operating profit rose 10.4% to £3.5 billion.
Part of the company's simplification strategy involves reducing the number of brands it sells. It is aiming to have around 125 brands or less, down from 184 now.