Commerzbank is to buy Dresdner Bank from Allianz in a $US14.5 billion deal.
Commerzbank announced on Sunday the puirchase will be in two steps, taking 60% this year and the rest in 2009.
Much of the price will be paid to Allianz in the form of shares, leaving Europe's biggest insurer with a stake of almost 30% in the new Commerzbank.
The deal puts a price tag of Â9.8 billion on Dresdner. Allianz paid Â24 billion for it in 2001.
However, its market value will be about Â13 billion euros - less than half that of the sector leader, Deutsche Bank.
Allianz will also buy Commerzbank's fund management business Cominvest.
The new owner plans to close more than a third of the combined group's 1,900 branches and cut 9,000 jobs.