Midshires, which has been banned from talking to other suitors since Royal Bank tabled a pounds 630m bid, is to pay it a pounds 5m "escape fee". The bank will receive an additional pounds 10m from Midshires if the building society eventually falls to Halifax.
Halifax made a pounds 780m offer for Midshires in March.
The development, which comes after weeks of deadlock, bodes well for Midshires members, who will each receive an additional pounds 150 if the Halifax deal goes through. Analysts believe other potential bidders such as Barclays and Lloyds TSB - could emerge.
The Royal Bank dismissed reports of a split between Viscount Younger, its chairman, and George Mathewson, its chief executive, over the line of management succession.
It had been rumoured that Viscount Younger, who is 66, had informally approached Sir Iain Vallance, chairman of BT, and offered him the chairmanship. According to press reports, relations have soured between Mr Mathewson - frequently tipped as the next Royal Bank chairman - and Viscount Younger after Mr Mathewson backed a pounds 30bn merger with Halifax.
The bank said the two had an excellent relationship and speculation about the succession was premature.Reuse content