Spain’s Banco Santander, SA announced Monday that it is buying out the 75% of Sovereign Bancorp Inc., that it didn’t already own.

Banco Santander is to acquire Sovereign in a stock-for-stock transaction. It currently owns 24.35% of Sovereign’s ordinary outstanding shares, and a committee of independent directors of Sovereign requested that Santander consider acquiring the 75.65% of the company it did not currently own.

Under the terms of the agreement, which was approved by the executive committee of Santander and unanimously approved by the non-Santander directors of Sovereign, Sovereign shareholders will receive 0.2924 Banco Santander American Depository Shares for every share of Sovereign common stock they own.

The transaction, which has an aggregate value of approximately US$1.9 billion, is subject to customary closing conditions, including necessary bank regulatory approvals in the U.S. and Spain and approval by both companies’ shareholders. The transaction is expected to close in the first quarter of 2009.

“This acquisition represents an excellent opportunity for Santander and for Sovereign,” said Juan Inciarte, executive board member of Banco Santander. “We know Sovereign very well. It is a strong commercial banking franchise in one of the most prosperous and productive regions of the United States, with high growth potential, which will further diversify Banco Santander’s geographical reach. We look forward to working closely with Sovereign’s senior management and welcoming the entire Sovereign team to Santander.”

Ralph Whitworth, chairman of the Sovereign commitee, said, “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. We considered our options and this transaction very carefully and believe that it provides stability and upside potential for Sovereign, its shareholders, customers, employees and other stakeholders. We know Santander well and look forward to working with them to close this transaction.”