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Directors at Allianz AG and Dresdner Bank AG have approved the German insurance giant's takeover of the country's No. 3 bank to form a new European powerhouse, Allianz said Sunday in a statement.

Allianz, which already owns 20 percent of Dresdner, will pay $47.81 per share in cash and stock for the remaining 80 percent stake. That represents a premium over Dresdner's closing stock price of $46.25 on Friday.

Dresdner shareholders will receive one Allianz share plus $180 for every 10 Dresdner shares they hold. An Allianz spokesman said it would cost Allianz nearly $21.6 billion to buy the remaining shares of the Dresdner.

To pay for the offer, Allianz has approved a plan to buyback up to 3.5 percent of its own shares.

"The union of Allianz and Dresdner is the common answer to the challenge of the future," Allianz said in a statement. "With a look at the growth market for retirement funds and asset management, a comprehensive supplier of insurance, investment and bank products has emerged on the German market."

The takeover of Frankfurt-based Dresdner is the third attempt at a mega-deal involving the bank. Last year, Allianz brokered failed plans to merge Dresdner with competitors Deutsche Bank and Commerzbank.

Buying Dresdner extends Allianz's reach from insurance products into asset management and retail banking, and follows a strategy already adopted by rivals such as Citigroup of the United States, Switzerland's Credit Suisse and Fortis of Belgium.

In Germany alone, the company will have more than 20 million customers and a market value of more than $90 billion, nearly double that of Deutsche Bank, the country's largest, at $46.8 billion.

Allianz hopes to market its financial services through such a retail banking channel, and this strategy was a driving force in failed Deutsche deal and remains an impetus for the current Dresdner deal.

Dresdner Chairman Bernd Fahrholz will receive a seat on the merged groups' management board and become deputy chairman of the group. Allianz Chairman Henning Schulte-Noelle will remain in his post.

Allianz also said it plans to list Dresdner's investment banking unit, Dresdner Kleinwort Wasserstein, on the stock exchange "within the next few years."

A similar plan to cleave off Dresdner's successful investment bank unit torpedoed last year's merger attempt between Dresdner and Deutsche Bank. That deal had already been announced when Dresdner balked at Deutsche's plan to sell the division.

Allianz's supervisory board finalized its offer Saturday, and the Dresdner Bank supervisory board signed off on the deal Sunday. A press conference will be held Monday to announce further details.

The deal is still subject to approval from each company's shareholders and competition authorities.

Allianz hopes the deal will strengthen its position as a leading player in Germany's growing shareholder culture. With pension reform sweeping the continent, many Europeans are turning to U.S.-style private retirement funds to buoy them in old age.

A deal could also trigger a cross-border merger blitz as the region's banks jockey for position in a consolidating market.

Deutsche Bank chairman Rolf Breuer said last week that his bank is in similar talks with several European insurers, including AXA of France, about distributing financial products through Deutsche Bank's retail chain, Deutsche Bank 24.