Spanish bank to buy Sovereign - $1.9B

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NEW YORK (CNNMoney.com) -- Spanish bank Banco Santander, S.A. will acquire Sovereign Bancorp in a stock-for-stock transaction valued at about $1.9 billion, the companies announced Monday.

Under the terms of the agreement, Sovereign shareholders will receive 0.2924 Banco Santander American Depository Shares (ADSs) for every 1 share of Sovereign common stock they own.

Based on the closing stock price for Santander ADSs on Friday, the transaction is valued at approximately $1.9 billion, or $3.81 per share.

Santander, the largest bank in the euro zone by market capitalization, currently owns 24% of Sovereign's ordinary outstanding shares.

"Given the unprecedented uncertainty in the current market environment and the challenges facing Sovereign, we believe this is the right transaction at the right time for Sovereign," said Ralph Whitworth, Chairman of the Capital and Finance Committee of Sovereign's Board of Directors.

The Wyomissing, Pa.-based Sovereign is grappling with increasing loan losses. Its second-quarter net chargeoff rate more than tripled from levels a year prior.

But the deal is subject to necessary bank regulatory approvals in the U.S. and Spain and approval by both companies' shareholders.

Sovereign's parent company tapped former Chittenden Corporation CEO Paul A. Perrault to replace Joseph P. Campanelli, effective Jan 3. CFO Kirk Walters is serving in the interim.

Campanelli served as the bank's president and CEO, following the 2006 resignation announcement of his predecessor, Jay S. Sidhu.

Sovereign Bancorp is the parent company of Sovereign Bank, with 750 branches and about 12,000 employees, with a major presence in the Northeast.