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WARSAW (Reuters) - BNP Paribas (BNPP.PA) has agreed to buy the Polish business of its Dutch rival Rabobank RABO.UL for $1.4 billion, as the French bank returns to the acquisition trail after a period of re-structuring and seeks growth outside the euro zone.
But the deal to buy Rabobank's BGZ BGZ.WA unit, Poland's No.11 bank in terms of assets, needs approval from Poland's banking regulator KNF, which has previously signaled it is skeptical about further consolidation in the sector.
KNF said on Thursday it would look into why Rabobank was selling its Polish unit. "We will be verifying the reasons why Rabobank decided to change its strategy for its presence on the Polish market," it said in a statement.
BNP adviser Jean Lemierre told Reuters the bank had already started talks with the regulator. "We're confident it will not take long," he said.
Poland's banking sector is undergoing a period of change as some European banks, still tackling problems from the financial crisis, sell Polish businesses to boost their capital positions.
Rabobank had said in June it was looking at options for BGZ given the expected consolidation in Poland's financial sector, a trend which implied it would have to make acquisitions to avoid being squeezed by increasingly powerful rivals.
The Dutch lender, which lost its triple-A credit rating from Standard & Poor's in 2011, is focusing on its banking business and sold off fund management and private banking units to raise funds and shore up capital. It has also been hit by a $1 billion fine for its part in the Libor interest-rate rigging scandal.
Rabobank made no comment beyond saying it wanted a partner for BGZ. "It was very important for Rabobank to find a respectable partner who can further develop Bank BGZ's ambitions," said Rabobank executive board member Berry Marttin.
By contrast, some stronger banks are looking to add assets in Poland, a market of 38 million people whose economy has outperformed the euro zone during the crisis. Poland's gross domestic product growth accelerated to 1.9 percent in the third quarter from 0.8 percent in the previous three months.
The Polish bank sector's appeal is enhanced by its banks having escaped the bad debt problems still dogging many of their western European counterparts.
BNP's proposed acquisition of BGZ, whose shares jumped by up to 8 percent on the deal, is its latest attempt to buy a chunk of the Polish market after it lost out to Spain's Banco Santander (SAN.MC) in a bidding war for Bank Zachodni BZW.WA.
The deal values BGZ at 1.2 times net assets, a discount to the average 2.0 ratio among other Polish banks. BGZ's return on equity, a standard efficiency measure for lenders, stands at 5.2 percent, or less than half the market average.
Rabobank had not officially put its Polish unit up for sale, though market sources had told Reuters buyers were being sought. Besides BNP, Italy's UniCredit (CRDI.MI) and Santander (SAN.MC) had also expressed interest in the unit.
BNP, which would buy 98.5 percent 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 BNP.WA.
The companies did not give a price per share for the deal but the total offered amount implies BNP would be paying 82.5 zlotys per BGZ share, or around 13 percent more than Rabobank paid last year when it bought a stake from the state.
BGZ shares were last traded at around 76.70 zlotys, a 7 percent discount to the value of the offer and implying some concerns it may not go through.
The deal is BNP's first cross-border acquisition since its 2008 takeover of Benelux crisis victim Fortis. The French bank has beefed up its balance-sheet and restructured since then.
BNP adviser Lemierre, former head of the European Bank for Reconstruction and Development (EBRD), sees promise in Poland.
"As EBRD chairman I've been investing here for 15 years," he said. "It's an example of well used EU funds. The strength is in economic growth and job creation and we believe this will continue in Poland. We see this as a strong banking market."
Bankers and analysts say BNP is now the most robust French bank and is able to make more acquisitions. It has the largest capital cushion of the three main French lenders, measured under tough new global capital rules, and analysts at Morgan Stanley expect the bank to hike its dividend in the next few years.
BNP had a core Tier 1 ratio of 10.8 percent at the end of the third quarter, compared with 9.9 percent at SocGen and 10.5 percent at Credit Agricole.
But analysts also say it is unlikely to buy a major European bank, instead focusing on medium-scale deals like BGZ.
"The acquisition of Bank BGZ constitutes a major step towards attaining a critical size in Poland," BNP Paribas CEO Jean-Laurent Bonnafe said in a statement.
Kamil Stolarski, an analyst with Espirito Santo, said the acquisition would still only give BNP Paribas 4.3 percent of the Polish market by assets. "As it is still not a significant share I would expect them to try to buy more banks," he said.
In another recent deal, Poland's top lender PKO PKO.WA bought the Polish units of Sweden's Nordea (NDA.ST) for 694 million euros ($941 million) in June.
Additional reporting by Lionel Laurent and Matthias Blamont in Paris, with Sara Webb in Amsterdam and Carmel Crimmins in Dublin; Writing by Christian Lowe; Editing by David Holmes and Mark Potter