Dubai's Shuaa Capital bought 14 percent of Bahrain's Khaleeji Commercial Bank on Sunday for 9.6 million dinars ($25 million) and said it would use the stake to support the bank's expansion.
Shares in Dubai's Shuaa Capital rose 2 percent to AED1.54 on news of the acquisition.
The Dubai-listed investment bank purchased the stake from Alimtiaz Investment Group for 0.065 dinar per share, acquiring 147.1 million shares in a special auction, the Bahraini bourse said.
KHCB is an Islamic retail bank with assets of 709 million dinars. Its biggest shareholder is Bahraini Islamic investment firm GFH Financial Group, which has said it aims to list KHCB in Dubai.
"It is with no doubt that the shareholders' value will see substantial growth if KHCB obtains final approvals to list on the Dubai Financial Market," Shuaa's chairman Jassim al-Seddiqi said in a statement.
Abu Dhabi Financial Group (ADFG) bought a 48.36 percent stake in Shuaa last month, leading to speculation that the investment bank could form a central part of ADFG's financial industry strategy for the Gulf.
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