Kingdom Holding, run by billionaire Prince Alwaleed bin Talal, plans to acquire a 16.2 percent stake in Banque Saudi Fransi from Credit Agricole, which is valued at around SR5.8 billion ($1.5 billion).
The deal would make the Saudi tycoon the largest shareholder in the bank, which has 86 branches throughout the Kingdom.
The prolific investor has stakes in global companies that include Twitter, Apple and News Corp.
Kingdom plans to buy the stake from Credit Agricole Corporate and Investment Bank (CACIB), the investment banking unit of the French lender – which will remain as a strategic investor in the Saudi bank.
Prince Alwaleed bin Talal said “Our investment in Basque Saudi Fransi demonstrates our core belief in the outlook for the Saudi economy underpinned by Vision 2030 and the National Transformation Plan.”
Saudi Arabia is encouraging investment in its financial sector as it seeks to reduce its dependence on the oil industry and attract global financial names to establish operations in the Kingdom.
A massive privatization program that includes the partial listing of Saudi Aramco, the national oil company, is spurring investment activity and is expected to provide a big boost to capital markets as international banks help to raise debt and finance deals.
Goldman Sachs last month won approval to trade equities in Saudi Arabia, while Citigroup, in which Prince Alwaleed is also an investor, obtained an investment banking license in April.
The Credit Suisse transaction is expected to close in the second half of 2017, subject to customary closing conditions including required regulatory approvals, Kingdom said in a statement.
The Saudi units of HSBC Holdings and Royal Bank of Scotland Group are exploring a potential merger which would create the third-biggest bank in the country with assets of almost $80 billion.
The sale of the Saudi Fransi stake will help Credit Agricole increase its cash buffers. It also has an option to sell an additional 5 percent stake.
“Given the current market price, Kingdom Holding appears to have got a good discount for the stake purchase and could reflect positively on their books when the sale materializes,” Muhammad Potrik, head of research at Riyad Capital, told Bloomberg News.
Credit Agricole has been active in Saudi Arabia since 1949 and has been associated with Banque Saudi Fransi since its creation in 1977.
The Saudi bank has 3,200 employees across the country.
Jean-Yves Hocher, CEO of CACIB, said that the bank planned to “further develop its direct presence and extend its activities in the country.”