Newbridge's first attempt to gain control collapsed in 2003

The rare deal will give effective control of a state-owned mainland bank to a foreign firm for the first time.

The Asian bank specialist will make the buy from four other stake holders, becoming the largest shareholder.

A notice by the bank, published in the state-owned China Securities Journal on Monday, said negotiations on the deal were concluded over the weekend.

Four government entities in Shenzhen, a town bordering Hong Kong, are to transfer their stakes to Newbridge, giving it 17.89% of the bank, the notice said.

It did not give financial terms for the deal, which requires approval by banking regulators.

Seats on board

Newbridge, whose first attempt to buy control of the Shenzhen-based bank collapsed in a legal wrangle in 2003, is one of many foreign investors keen to buy a foothold in a huge industry.

However, Sunil Garg, an analyst with Fox-Pitt, Kelton in Hong Kong, said: "Of the five listed banks, this is by far the weakest of the lot. If you look at the numbers of this company, you'll find that the capitalisation... is a pretty big issue."

As the largest single shareholder, Newbridge would get a majority of board seats under Chinese law.

After the announcement Shenzhen Bank shares were up 3.7% to 9.59 yuan, making an 18% stake worth 3.34 billion yuan.

But acquisitions are never completed on the basis of stock prices in China, which are generally regarded as overvalued due to a scarcity of investment options.