VIENNA (Reuters) ? Austria?s fourth-largest bank Bawag P.S.K. is being sold to a group of investors led by US buyout fund Cerberus Capital Management , the head of trade union OeGB, which owns Bawag, said yesterday.

OeGB President Rudolf Hundstorfer declined in a news conference to name the price the group agreed to pay for Bawag.

Sources familiar with the deal said the group would pay 2.6 billion euros ($3.4 billion), and inject an additional 600 million euros in fresh cash to prop up Bawag?s depleted balance sheet.

Cerberus beat rival Lone Star and German state-owned bank BayernLB in the Bawag auction, launched by the OeGB this spring after a series of accounting scandals threw the union into political and financial disarray.

Hundstorfer said one reason for the decision to sell to the Cerberus group was that it included Austria-based members ? mortgage bank Wuestenrot, insurer Generali?s Austrian arm and Austrian investor Hannes Androsch.

All major Austrian players, including Bawag?s four biggest domestic rivals, dropped out of the auction earlier.

The Austrian investor, Hannes Androsch, Austrian finance minister in the 1970s, said the price was ?not a bargain.?

?It will be a great effort to justify this price and this means at the end of the day to earn it,? Androsch said at the news conference.

Bawag Chief Executive Ewald Nowotny said he welcomed the buyer because the sale to the Cerberus group meant the bank was kept intact and based in Austria rather than being broken up or made a subsidiary of a foreign bank.

?There is also the perspective that the bank may be sold in an initial public offering in some years in the future,? Nowotny said in the news conference.

Cerberus began as a distressed debt investment firm but has since become a powerful hedge fund and private equity investor.

It has deep experience with investing in struggling businesses across all sectors.

The fund led a group that bought General Motors? banking arm GMAC for $14 billion earlier this year, and would make Bawag its European banking headquarters, sources have said.

Last month, Cerberus sold part of Japanese Aozora Bank in a $3.2 billion initial public offering, Japan?s biggest in eight years.

With the proceeds of the sale, the OeGB has to cover net debts of at least 1.7 billion euros. It also must turn over up to $200 million to creditors of collapsed US broker Refco Inc. after a settlement agreed in June.

Bawag?s problems started in March when managers and top union officials admitted the bank had made major losses in offshore deals, which went awry in the late 1990s, and that they had kept the losses off the balance sheet.

The scandal peaked when a U.S. lawsuit demanding $1.3 billion in damages from the Austrian bank over its role in the collapse of Refco triggered a run on Bawag in April and the government had to broker a bailout.

State prosecutors have filed charges, including for fraud and false accounting, against former Bawag chief executives, the banker who presided over the offshore losses and the trade unions? former finance chief. They all deny any wrongdoing.