FRANKFURT/MILAN (Reuters) - German cement maker HeidelbergCement (>> HeidelbergCement AG) is buying control of rival Italcementi (>> Italcementi SpA) in a deal that values the smaller Italian company at around 6.7 billion euros ($7.40 billion) to bolster its position in growing markets as consolidation in the sector picks up.

HeidelbergCement will buy a 45 percent stake in Italcementi from top shareholder Italmobiliare for 10.60 euros a share in cash and shares before launching an offer for the remaining shares.

The deal marks a return to the market for HeidelbergCement after years of restraint while it cut its debt and focussed on improving its credit ratings.

It comes after the merger of Holcim and Lafarge to create the world's biggest cement maker, LafargeHolcim, (>> Lafargeholcim Ltd) with $44 billion in annual sales.

That compares with HeidelbergCement's 12.6 billion euros in sales and Italcementi's 4.16 billion last year.

HeidelbergCement said the combination with the Italian company would create the global market leader in aggregates and give it access to new markets in Egypt, Morocco and Thailand.

Chief Executive Bernd Scheifele said the company was buying at the bottom of the cycle.

"We think the strategic logic is very compelling," Scheifele told journalists on a call. "We believe...that core markets of Italcementi have bottomed and are clearly coming back in volume and pricing."

The 151-year-old Italian company, which is present in more than 20 countries and is market leader in Egypt, has gone through a heavy restructuring and after years of losses analysts expect it to return to a net profit this year.

HeidelbergCement, which also released better than expected second-quarter results on Tuesday, increased its 2019 targets as a result of the deal, saying it was expected to bring annual savings of 175 million euros by 2018 and improvements to its free cash flow.

The price for the 45 percent stake will be partly paid by issuing at least 7.75 million new shares, equivalent to about 4 percent of its current share capital, plus financing from a bridge loan of 4.4 billion euros.

The deal implies an enterprise value of 6.7 billion euros for Italcementi, including debt and pension liabilities and is equivalent to 7.9 times Italcementi's earnings before interest, tax, depreciation and amortisation.

Italcementi, which is controlled by Italy's Pesenti family, has a market capitalisation of 2.3 billion euros, against HeidelbergCement's 13.3 billion euros.

With an annual production capacity of more than 60 million tonnes and 46 cement plants, Italcementi is the world's fifth-largest cement producer, according to its website.

Mediobanca was adviser for Italcementi and Morgan Stanley for HeidelbergCement.

($1 = 0.9051 euros)

(Reporting by Arno Schuetze, Francesca Landini, Claudia Cristoferi and Paola Arosio; Additional reporting by Ilona Wissenbach; Writing by Victoria Bryan; Editing by Georgina Prodhan and Susan Thomas)

By Arno Schuetze and Francesca Landini

Stocks treated in this article : Italcementi SpA, HeidelbergCement AG, Lafargeholcim Ltd