As expected, the boards of Unicaja Banco SA and Liberbank SA on Dec. 29 approved the terms of the two Spanish lenders' all-share merger, which will create the fifth-largest bank in Spain with roughly €110 billion in assets, according to Reuters.

The all-share merger will see Unicaja absorb Liberbank at an exchange ratio of 2.7705 Liberbank shares for 1 Unicaja share, the lenders said.

The deal came after the banks earlier agreed in principle to appoint Unicaja Chairman Manuel Azuaga executive chairman of the combined entity, with Liberbank CEO Manuel Menéndez keeping the same role. After Azuaga's term ends, the chairman role will no longer have executive functions and the CEO position will be reevaluated.

The deal values Liberbank at roughly €763 million, based on the Dec. 29 closing price of Unicaja shares, Reuters reported, citing brokerage Jefferies. As part of the deal, Unicaja will grant 1.075 billion new shares to Liberbank holders.

Unicaja will take a 59.5% stake in the combined entity, while Liberbank will hold the remaining 40.5%, the lenders said. The entity is expected to make roughly €192 million in annual cost savings and achieve a fully loaded common equity Tier 1 ratio of 12.4%, after €1.2 billion in costs related to the merger.

The new entity also aims to achieve a return on tangible equity of about 6% in 2023, the newswire noted.

The two banks' shareholders are expected to approve the merger in the first quarter of 2021. Completion of the deal is seen by the end of the second quarter or early in the third quarter of 2021, pending regulatory approvals.

Deutsche Bank SAE and Mediobanca - Banca di Credito Finanziario SpA served as financial advisers to Liberbank and Unicaja, respectively.