Spanish banking group Santander is set to acquire struggling rival Banco Popular after a significant deterioration of the latter’s liquidity position.

The rescue comes after the European Central Bank (ECB) determined that the Italian lender “was failing or likely to fail”.

Santander paid a nominal value of ‎€1 for the deal, and now plans to raise around ‎€7bn through a rights issue to boost Banco Popular’s capital position.

“The significant deterioration of the liquidity situation of the bank in recent days led to a determination that the entity would have, in the near future, been unable to pay its debts or other liabilities as they fell due,” ECB said.

Santander said that the deal will make it the leading bank by lending and deposits in Spain, catering to over 17 million customers.

The combined group will operate under the Santander brand and will be headed by Santander Spain’s existing management team. Rami Aboukhair will serve as the CEO of the integrated group.

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Commenting on the deal, Santander said: “The acquisition is expected to generate a return on investment of 13-14% in 2020, and an increase in Earnings Per Share (EPS) in 2019. The combined business will benefit from increased profitability with strong potential for further revenue growth. The expected cost synergies of close to €500 million per year from 2020 will lead to efficiency ratios that are among the best in both Spain and Portugal.

The acquisition would have a neutral impact on its core capital ratio, Santander said.