(Reuters) - British bank TSB said it had agreed to be taken over by Spanish lender Banco Sabadell in a deal which values the business at 1.7 billion pounds.

Lloyds Banking Group, which holds a 50 percent stake in TSB, said it had agreed to sell a 9.99 percent shareholding to Sabadell and had given an irrevocable undergaking to sell the remainder of its stake to the fifth largest Spanish bank.

Sabadell saId that it would raise 1.6 billion euros (1 billion pounds) of new capital at 1.48 euros per share to help fund the deal.