TSB, Britain's seventh largest bank, has accepted a 1.7 billion-pound ($2.6 billion) cash offer from Spain's Banco Sabadell.
The bank was spun off as part of the 20-billion pound recovery plan to bail out Lloyds Banking Group from the 2008 financial crisis. Shareholders will receive 340 pence a share.
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Lloyds said Friday it has agreed to sell its entire 50 percent stake. The deal is conditional on regulatory approval.
Barcelona-based Sabadell said it was attracted by a U.K. banking market with "a well-defined and stable regulatory framework, consistent profitability and good future growth prospects."
Investors who bought TSB at its offer price nine months ago at 260 pence received a 31 percent premium.