Italy's second-largest bank has come riding to the rescue of Irving Bank Corp. in the role of a white knight.

Irving said Monday its board accepted a $65-a-share cash tender offer from Banca Commerciale Italiana of Milan for 51 percent of its common shares. The tender begins today.The deal, designed to fend off a hostile tender offer from Bank of New York Co., was valued by Irving at between $1.1 billion and $1.2 billion. It includes a special dividend of $10 a share payable to Irving shareholders once the deal goes through.

The money to pay the special dividends would come from asset sales. Under terms of the agreement, Irving would sell its 50-story headquarters at 1 Wall St. It also would sell its 39 percent equity interest in a Swiss bank, Banca della Svizzera Italiana, for an expected price significantly in excess of current market value of approximately $325 million.

The tender offer from Commerciale Italiana is conditioned upon a minimum of 6.25 million shares being tendered, as well as regulatory approvals.

Only last week, Bank of New York's shareholders voted to support management's $1 billion-plus hostile bid for Irving. The hostile offer is for $15 in cash and 1.575 of Bank of New York's common shares for each of Irving's 18.1 million common shares outstanding.

Bank of New York holds a 4.9 percent stake in Irving and is running a slate of 16 candidates for Irving's board. Irving's annual shareholders meeting is scheduled for Thursday, but the bank said it wouldn't conduct any business at the meeting in order to give shareholders more time to consider the latest bid.

Irving will discuss both offers with its shareholders at a special meeting on Saturday, the firm said in a prepared statement.

Bank of New York's takeover offers began about seven months ago and have been repeatedly turned down by Irving, which said it wanted to remain independent.

Bank of New York had no immediate comment on Irving's announcement. We're studying the announcement, a spokesman said.

In trading on the New York Stock Exchange at mid-afternoon Monday, Irving shares rose 12.5 cents to $61.50, while Bank of New York gained 87.5 cents to $31.50.

Irving Chairman Joseph A. Rice said in a statement, Our shareholders will benefit far more from the affiliation with BCI (Banca Commerciale Italiana) than the proposal advanced from Bank of New York.

Irving anticipates increases in its revenue as a result of its ongoing relationship with BCI, he said.

In addition, BCI and Irving intend to explore mutual business opportunities in several of their current businesses including dollar transfer operations, investment management, commercial paper, capital markets activities and trade finance.

Banca Commerciale, based in Milan, has assets of about $60 billion, whereas Irving's assets total more than $24 billion.

A spokesman for Irving said the bank's current management is expected to remain in place. The restructuring plan would be implemented by a five-member executive committee comprised of Irving's chairman and president, two Banca Commerciale representatives and an outside Irving director, he said.