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The premium offer is valued at 36 percent above A&L's closing share price Friday, The Times of London reported.

Analysts at Lehman Brothers said the purchase could reduce bank costs by nearly $4 million.

Santander already owns British bank Abbey, which plans to open 300 additional branches by 2012, the Times reported.

A&L, pursued in 2006 by French bank Credit Agricole, was seen as a takeover target due to its $61.5 billion in deposits, the Times reported.

The bank appointed a former Ulster Bank chairman Alan Gillespie to serve as its new chairman, starting Sept. 8. The bank's previous chairman, Derek Higgs, died in April.

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