Jay Sidhu, who turned Sovereign Bancorp Inc. (SOV) from a small savings and loan into an $89 billion financial powerhouse, resigned Wednesday amid criticism of a deal he engineered with a Spanish bank that bypassed shareholder approval.

The company announced early Wednesday that Sidhu had resigned as president and chief executive officer after 17 years at the helm. Vice Chairman Joseph Campanelli, head of the company's New England operations, was named president and CEO.

The board formed an executive search committee to seek a successor to Sidhu and said the committee would consider Campanelli as part of its search process.

The Philadelphia-based company announced Sidhu was resigning and retiring for family health reasons. But the personable New Delhi native's last deal had led to increasing pressure for his departure.

Sidhu, who will serve as non-executive chairman until Dec. 31, would not immediately comment further on his resignation, company spokesman Ed Schultz said early Wednesday.

"It's a surprising turnabout and a reversal of fortune for Jay Sidhu," said Chris Young, director of mergers and acquisitions research at Institutional Shareholder Services, or ISS, a proxy advisory firm in Rockville, Md.

"It looked like he was free and clear despite all of the anti-shareholder measures the company took over the last 12 months," Young said. "It appeared he was going to get away with it."

The 55-year-old emigre was a deal maker who turned Sovereign into the nation's third-largest thrift, with nearly 800 branches from Maryland to New Hampshire.

Sidhu's fall from grace began with the announcement last October that Philadelphia-based Sovereign would sell a 19.8 percent stake to Banco Santander Central Hispano S.A. of Madrid for $2.4 billion in cash. At the same time, Sovereign acquired Independence Community Bank Corp. in New York for $3.6 billion.

Later, Santander would buy more shares in the open market to boost its stake to 24.9 percent.

It was Sovereign's 29th and largest deal since 1989. Sidhu had faced other skirmishes before, but this deal raised dissent from shareholders coast-to-coast.

The deal was crafted in a way that bypassed shareholder approval and consolidated power in friendly hands. Major shareholders had been upset at the dilution in their voting rights.

Sidhu stands to collect $13 million in severance pay, plus other benefits, according to his employment agreement filed with the Securities and Exchange Commission.