Banco Popular Espanol SA, the second-best-performing Spanish bank stock this year, has offered to buy Banco Pastor SA.
The all-share deal values Banco Pastor at about 1.3 billion euros ($1.8 billion).
Popular has 2,222 branches and 130 billion euros ($175 billion) of assets. Pastor, which has assets of 31 billion euros ($41 billion), traces its roots to 1776.
"Pastor was starting to look small in the Spanish banking landscape so this makes sense," said Javier Bernat, an analyst at Bankia Bolsa in Madrid. "For Popular, it's about gaining some scale with good-quality customer funds."
Pastor said it would respond to the offer "in due course."
A number of Spanish banks have been combining to cut costs in the wake of the collapse of the debt-fueled Spanish property boom.
