* Caixa offers 1.97 eur/share for Civica, valued at E980 mln
* Deal creates Spain's biggest bank by domestic assets
* Move complicates search of merging partner for Bankia (Adds confirmation, details)
By Andrés González and Tomás Cobos
MADRID, March 26 (Reuters) - Spain's La Caixa agreed on Monday to the takeover of smaller rival Banca Civica by its listed arm CaixaBank, creating Spain's biggest bank by domestic assets.
CaixaBank offered 1.97 euros per share for Banca Civica in an all-share deal valuing the whole bank at 980 million euros ($1.46 billion).
A second wave of consolidation in the Spanish banking sector is under way as lenders look to raise capital levels to cover losses sustained after a decade-long property and construction bubble collapsed in late 2007.
With about 285 billion euros ($374 billion) in assets, CaixaBank is around four times the size of Civica and the move will form Spain's biggest bank in Spain's domestic market, outstripping even Santander and BBVA.
The latter purchased state-rescued bank Unnim in early March.
As the newly installed Spanish government aims to reduce the number of lenders to around 10 from more than 40 before the economic crisis, the deal will also make it more difficult to find a merger partner for Bankia SA.
Bankia is particularly exposed to real estate and is defined as a systemic bank that could drag other lenders down if it had trouble writing down its losses related to property.
Sources had told Reuters that the government had hoped CaixaBank would step in to absorb Bankia's toxic real estate assets.
Shareolders of Banca Civica, which was formed less than two years ago by a tie-up of regional saving banks Caja Navarra, Cajasol, Caja Canarias y Caja de Burgos, will receive five shares of Caixabank for every eight of their shares.
This represents an 11 percent discount on the closing price of Banca Civica on Friday, as trading in the shares of CaixaBank and Banca Civica was suspended before the market opened on Monday.
CaixaBank closed at 3.145 euros on Friday, while Banca Civica ended at 2.22 euros.
CaixaBank will not request state funds for the takeover and will pay back the 977 million euros that Banca Civica has received from the state-backed restructuring fund FROB.
The banks said they hoped to finalise the deal and get the approval of their shareolders by June 30.
Sources close to CaixaBank said the lender could issue new shares to finance the takeover.
CaixaBank said in a statement it would maintain a dividend of 0.231 euros per share in 2012.
The combined group is set to meet easily the tough new capital requirements set by the Spanish government.
($1 = 0.7540 euros) (Writing by Julien Toyer; Editing by Erica Billingham, Gerald E. McCormick, Phil Berlowitz)