updated 7/26/2004 6:56:00 AM ET 2004-07-26T10:56:00

British bank Abbey National PLC on Monday approved a takeover proposal from Spain's Santander Central Hispano SA which would create the world's eighth-largest bank by market value.

Abbey, Britain's sixth-largest bank and second-biggest mortgage lender, said it had agreed with Santander on the terms of a recommended cash and shares offer.

It said details of the offer would be released later Monday.

British media have speculated that Santander, Spain's biggest bank, would offer between $10.12 and $10.67 a share, valuing Abbey at more than $14.72 billion.

Abbey's shares closed 18 percent higher at $10.67 on the London Stock Exchange on Friday after Santander confirmed it was in talks with Abbey about a possible takeover bid.

Abbey's share price has fluctuated widely in recent months as takeover rumors have swirled through the markets.

The group has cut jobs, sold non-core assets and reorganized its operations in a three-year overhaul designed to reverse two years of heavy losses.

It has insisted it would show a return to the black in the current financial year after losses hit $1.2 billion in 2003 and $1.7 billion the year before that _ the first time the bank had made a loss since going public in 1989.

Abbey blamed those losses on a move toward wholesale banking in the late 1990s which backfired when stock markets fell. As part of its turnaround program, which began 18 months ago, the bank is focusing solely on personal finance and selling or winding down all other interests.

Abbey's Chief Executive Luqman Arnold has said he expects a "substantial improvement" in the bank's performance this year as a result of the turnaround program. Changes have included its rebranding as just Abbey and a drive to rid its products of financial jargon.

Abbey's main offices are in London, Milton Keynes, Bradford, Glasgow and Edinburgh. It employed about 25,900 people at the end of last year and it has some 1.8 million shareholders.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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