BNP Paribas agrees to buy Polish Rabobank unit for $1.4 billion

France's BNP Paribas agreed to buy its Dutch rival Rabobank's Polish unit Bank BGZ , in a deal which values the target at 4.2 billion zlotys and is the latest example of consolidation among Polish banks.

The deal offers a 14% premium to the market value of BGZ, a rural-based Polish lender which ranks No.11 by assets, and could forge a player ranking No.8 in the local sector.

It comes after Poland's top lender PKO bought the Polish units of Sweden's Nordea's for 694 million euros in June.

Poland's banking industry is undergoing a period of change, with some troubled foreign banks selling businesses there to boost their capital positions, but others being keen to strengthen their foothold in an economy which has outperformed much of the euro zone in recent years.

Rabobank, the biggest Dutch retail bank, was recently fined $1 billion over its involvement in the Libor rigging scandal and did not officially put BGZ up for sale. But BNP, Italy's UniCredit and Spain's Banco Santander had all expressed interest in the unit.

Rabobank, which had a net profit of 2.1 billion euros in 2012, has announced sweeping cost cuts and the sale of non-core assets such as its fund manager Robeco and private Swiss bank Sarasin to raise money and shore up its capital buffers.

BNP, which will buy 98.5% of BGZ, has said it is looking to expand into faster-growing markets and buying BGZ could yield benefits from integrating it with the group's existing Polish business .

"The acquisition of Bank BGZ constitutes a major step towards attaining a critical size in Poland," BNP Paribas CEO Jean-Laurent Bonnafe was quoted as saying in a Rabobank statement.

"The transaction will establish the BNP Paribas Group as a reference player in Poland's banking sector."

The transaction is pending regulatory approval. The local financial watchdog KNF has said the Polish banking sector's concentration level is close to optimum.

"They need to ask for the permission," KNF spokesman Lukasz Dajnowicz said.