Italian bank UniCredit has agreed to buy smaller rival Capitalia to create Europe's second biggest bank.
The boards of both banks approved the takeover hours after they won the backing of a key group of investors controlling about 31% of Capitalia.
The all-share deal is worth almost €22 billion, and keeps Capitalia, Italy's third-largest bank, out of the hands of prospective foreign buyers.
The merger cements UniCredit's position as Italy's largest bank by market value.
The takeover enables the new UniCredit, with a combined market capitalisation of more than $135 billion, to expand on its home turf in a challenge to its larger domestic rival Intesa Sanpaolo.
