* Agrees to buy about 70 percent of Inversiones Magallanes
* Move would make Talanx one of Chile's top insurers (Adds detail, context, shares)
FRANKFURT, Dec 19 (Reuters) - Germany's third-largest insurer Talanx has agreed to buy a majority stake in Chilean rival Inversiones Magallanes, a $220 million deal that pushes the group further into growing markets to offset a stagnant European economy.
The deal, under which Talanx will buy a stake of around 70 percent in the Chilean insurer from its controlling family, will make Talanx one of the five largest insurers in Chile.
Talanx, already present in Chile, will launch a public offer aimed at buying out minority shareholders in Inversiones Magallanes. It has set a threshold of at least 80 percent ownership for the deal to go through.
"We are confident," a Talanx spokesman said, adding that a 100 percent stake in the company would cost around 180 million euros ($221 million).
This implies a sale price of around 126 million euros for the family-owned stake and 54 million for the remainder, which is held mainly by employees and former employees of Inversiones Magallanes.
Talanx intends to finance the transaction from its existing equity capital base, it said.
The move is part of Talanx's strategy of using bolt-on acquisitions to bolster growth and diversify risks in its international business. It wants at least 50 percent of premiums in primary insurance to come from outside Germany.
Talanx's current operations in Chile in retail and corporate insurance under the HDI brand generate 56 million euros in premiums and employ 240 people.
Inversiones Magallanes gross premiums of 247 million euros and net income of 9 million euros in 2013, Talanx said.
The acquisition will rank Talanx number five in the Chilean composite insurance business and number two in the motor business, based on gross written premium in 2013, Talanx said.
Talanx shares rose 0.6 percent to 24.90 euros by 0902 GMT, largely in line with the 0.7 percent rise in the STOXX Europe 600 insurance index. (1 US dollar = 0.8142 euro) (Reporting by Jonathan Gould and Harro ten Wolde; Editing by Sunil Nair and Clara Ferreira Marques)