UPDATE 3-UK boilermaker Baxi agrees merger with De Dietrich

* Merger to be structured as share swap

* Transaction set to close in second half of 2009

* Combined group to have turnover of 1.8 bln euros

* New group's enterprise value put at 2 bln euros

(Adds BC Partners comment)

By Rhys Jones and Simon Meads

LONDON, July 3 (Reuters) - Debt-troubled UK heating products maker Baxi [BCPRTG.UL] said on Friday it had agreed to merge with Dutch rival De Dietrich Remeha to boost its capital position and create one of Europe's biggest heating products companies.

Private equity-owned Baxi, which had debt of around 630 million pounds ($1 billion) at the end of 2008, revealed on June 12 that it was in merger talks with its smaller rival, and said the combined company would have a turnover of 1.8 billion euros and employ some 6,400 staff.

The merged group will be majority-owned by the Remeha Group and be led by De Dietrich Remeha Chief Executive Rob van Banning. It will be the third-biggest boiler maker in Europe, after German groups Vaillant and Robert Bosch [ROBG.UL], boasting products including Heatrae Sadia showers and Potterton boilers.