UniCredit SpA, Italy’s biggest bank, agreed to buy Capitalia SpA for $29.5 billion, creating the biggest bank by market value in the 13 nations using the euro.

UniCredit said Saturday it would swap 1.12 shares for each share of Capitalia. The deal values shares of Rome-based Capitalia, the No. 3 Italian bank by market value, at 8.41 euros each, or about 5.5% more than the last price on May 18.

Capitalia was the largest remaining target in a market where lenders can charge among the highest fees in Europe. UniCredit spent more than $25 billion on takeovers in the past two years under Chief Executive Officer Alessandro Profumo while local competitor Banca Intesa SpA paid 34 billion euros for Sanpaolo IMI SpA to create the country’s biggest branch network.

The purchase of Capitalia creates “an Italian bank that will be big and a real global player,” said Francesco Vercesi, who manages about $80 million in shares at Cartesio Alternative Investments in Milan and owns UniCredit stock. “The deal makes sense geographically. Uni-Credit is stronger in northern Italy and Capitalia in the central and southern parts of the country.”

The transaction cost the job of Capitalia CEO Matteo Arpe, 42, who bowed to pressure from Chairman Cesare Geronzi after months of feuding over merger strategy. Mr. Arpe took over as the youngest CEO of a major European bank in July 2003, turning a loss in 2002 into a record profit last year. Shares of Capitalia gained at an annual rate of about 52% under him, compared with a 17% gain for UniCredit.