UPDATE 1-Israel to buy Italian combat training jets in $1 bln deal

(Changes sourcing, adds details)

LONDON Feb 16 (Reuters) - Israel has chosen Finmeccanica's Alenia Aermacchi unit to supply 30 M-346 Master training jets for $1 billion, the Israeli defence ministry said on Thursday.

Israel selected Finmeccanica over Korean Aerospace Industries, Major General Udi Shani, director general of the Israeli Defence Ministry, said in a statement.

Finmeccanica shares were up 1.1 percent at 1515 GMT, outperforming Italy's benchmark index, which was down 1.3 percent.

As part of the agreement the Italian government will make $1 billion worth of "offset" purchases from Israel's defence industries, Shani said.

A spokesman for the Italian defence ministry was not immediately available to comment. (Reporting By Paolo Biondi; Writing by Steve Scherer; Editing by Greg Mahlich)