FRANKFURT (Reuters) - Germany's biggest insurer Allianz ALVG.DE plans to buy the shares in French credit insurance firm Euler Hermes ELER.PA it does not yet own for around 1.85 billion euros ($2.2 bln).

FILE PHOTO: Flags with the logo of Allianz SE, Europe's biggest insurer, are pictured before the company's annual shareholders' meeting in Munich, Germany May 3, 2017. REUTERS/Michaela Rehle/File Photo

Allianz said on Monday that it struck a deal to buy 11.3 percent of Euler Hermes’ stock for 122 euros per share in cash, taking its holding to 74.3 percent of shares.

It plans to make a public takeover offer for the remaining stock, excluding treasury shares, at the same price, a 21 percent premium to Friday’s closing price.

“Increasing ownership in Euler Hermes is... a logical step for Allianz to deploy capital in strategic businesses delivering solid operating performance, and to strengthen positions in core home markets and in property and casualty in particular,” Allianz said in a statement.

The deal will add about 1 percent to group earnings per share immediately and will reduce Allianz’s solvency ratio by 4 percentage points, the group said.

Analysts said the offer seemed expensive at around 16 times Euler Hermes’ estimated 2018 earnings, after Euler Hermes’ stock gained more than 20 percent this year, but made sense for Allianz.

“We believe the minority buyout is a strategically sensible move (which was discussed multiple times in the past) as it is a low-risk way to increase the exposure to the attractive credit insurance business segment,” Baader Helvea analyst Daniel Bischof said in a note.

Shares in Euler Hermes jumped 21 percent to a record high of 122.30 euros in early trade. They had jumped in June on a media report that Allianz was considering a buyout.

Allianz’s shares was down 0.2 percent at 197.55 euros.

Allianz said the takeover offer would have no impact on its 2 billion euro share buyback program.

Euler Hermes said in a separate statement that its supervisory board would meet to deliver a formal opinion regarding Allianz’s offer during the last days of December.

Analysts at Kepler Cheuvreux recommended that Euler Hermes shareholders accept Allianz’s offer and lifted its target price to 122 euros from 97 euros.

($1 = 0.8387 euros)