(Adds background, details of the deal and analyst's comments)

By Pietro Lombardi

Intesa Sanpaolo SpA has secured strong support for its takeover bid for smaller rival Unione di Banche Italiane SpA, a step that paves the way for the creation of Italy's largest bank and might kick off a long-awaited phase of consolidation in the continent.

More than nine out of 10 UBI shares, or 90.2%, were tendered, well above the 66.7% threshold Intesa was seeking to smoothly execute the merger.

Intesa in February surprised the market when it launched the bid for UBI. High costs and risks related to merger and acquisition operations have been seen as obstacles to combination in the overcrowded European banking sector. Last year, for example, merger talks between Deutsche Bank AG and Commerzbank AG fell apart.

The deal will create a leading European player and strengthen the financial system in Italy, Intesa Chief Executive Carlo Messina said in a statement late Thursday.

With the tie-up, Intesa--now the country's second-largest bank by assets after UniCredit SpA--will surpass its rival and become the largest Italian lender and the eurozone's seventh-largest.

Intesa's offer was "a success beyond all expectations," Equita SIM analyst Giovanni Razzoli said.

"The achievement of a wide adhesion will also have positive consequences on the deal because it triggers a strong consensus on the integration by all stakeholders, erasing the execution risk," Mr. Razzoli said.

Italian banks have struggled for years with bad loans amassed during the financial crisis. Moreover, low interest rates in Europe have hit their core business of making money through loans, making it less profitable, mirroring a trend seen across the region.

Regulators in Europe have signaled they are willing to ease some conditions for mergers. The European Central Bank in early July published a draft guide saying that eurozone banks considering M&As will be able to use temporarily internal models to calculate capital requirements of the merged entity, and will be allowed to use an accounting treatment known as badwill, while the ECB won't necessarily ask for higher capital.

Badwill will play a key role in the Intesa-UBI deal. It is an accounting treatment which allows buyers to book a profit if they buy a target for less than its book value. When this happens, the buyer can treat the difference as a gain.

As part of the deal, mid-sized lender BPER Banca SpA will buy 532 branches of the new entity, while insurer UnipolSAI Assicurazioni SpA will buy the insurance assets of the branches sold to BPER.

Intesa sweetened its offer earlier in July, adding a cash component to its previous all-stock bid. UBI shareholders were thus offered 57 European cents ($0.67) in cash and 1.7 Intesa shares for each share they tendered.

Based on the value of the shares on Feb. 14--before the takeover bid was announced--the offer values UBI shares at EUR4.8 each.

The board of the target lender had rejected the deal, even after the offer was improved as it believed it didn't reflect the value of the bank.

The data Intesa released late Thursday are preliminary, with the final results to be published on Aug. 4.

"The achievement of the 90% adhesion also determines the delisting of the UBI share since Intesa will not restore its free float," Mr. Razzoli said.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com; @pietrolombard10