BERLIN: The German state of Saxony has decided to sell the Landesbank Sachsen (SachsenLB), which has been hard hit by the US sub-prime crisis, to the Landesbank Baden-Wuerttemberg (LBBW), a spokesman said Sunday.

He said the regional cabinet had held an urgent meeting to agree the sale of the troubled bank, which was given a 17.3-billion-euro (23.6-billion-US-dollar) bailout by Germany's savings bank in the wake of the crisis that threw world markets into turmoil.

The premier of Saxony, Georg Milbradt, told MDR radio that the lowest price his government was prepared to accept for SachsenLB was 300 million euros.

The two banks were expected to announce the buy-out of SachsenLB by LBBW at a press conference later on Sunday.

The shareholders of the two banks still have to approve the deal, as does the regional parliaments in Saxony and Baden-Wuerttemberg.

The German daily Die Welt on Friday said the lifeline turned out to be insufficient to resolve SachsenLB's liquidity woes as Germany's smallest state-run Landesbank had been in even deeper trouble than thought, making a merger urgent to save it.

Die Welt reported that the bank lost another 400 million euros as a result of investments in the US home loans market, and quoted a source as saying it faced a clear choice between bankruptcy and a buy-out by another bank.

SachsenLB has refused to disclose the size of its investments in the sub-prime market or to confirm reports that it made big investments in funds held by its Irish subsidiary which may be in trouble.

Sub-prime is the name given to home loans made to investors in the United States who have little or no credit rating.

Another German state bank, BayernLB, admitted on Friday that it had direct investments in the US sub-prime market but said it did not experience any liquidity problems with the investments and did not expect a negative impact on its business due to the credit crisis.

BayernLB said it was directly affected through its US arm but did not disclose the extent of its investment. - AFP/ac