Prince Alwaleed will retain the other 78.1 per cent stake in Kingdom Holding. Image Credit: Reuters

Saudi Arabia's sovereign wealth fund has bought a $1.5 billion stake in the investment company of billionaire Prince Alwaleed bin Talal.

The Public Investment Fund acquired 16.9 per cent of Kingdom Holding Co. from Prince Alwaleed for 9.09 riyals a share, the closing price on the last trading day before the transaction was announced. Prince Alwaleed will retain a 78.1 per cent holding, KHC said on Sunday, with the remaining 5 per cent of the stock listed on the Saudi bourse.

The firm's shares rose as much 9.9 per cent in early trading in Riyadh, before paring gains to 8.9 per cent to trade at 9.90 riyals as of 11.51am.

The PIF's investment brings Alwaleed, whose grandfather was the founder of modern Saudi Arabia, closer to the Saudi government after years of operating independently. The wealth fund is chaired by Crown Prince Mohammed bin Salman and is a key part of his plan to transform the oil-dependent economy by investing in other industries.

Prince Alwaleed, 67, became one of the highest profile Saudi investors after taking stakes in companies such as Citigroup and Apple. He's supported Prince Mohammed's modernisation efforts, including giving women the right to drive.

Buffett fan

Alwaleed has made a series recently. He invested about $270 million in music streaming service Deezer. Last year, he sold a stake in his Rotana Music label to Warner Music Group Corp. More recently, he raised $2.2 billion by selling part of his stake in the Four Seasons hotel chain to Bill Gates' Cascade Investment LLC.

Alwaleed is known for long-term investments and is a fan of Warren Buffett. He once called himself the Oracle of Omaha's Arabian equivalent.

The prince also holds a stake in Twitter Inc., and has backed Elon Musk's attempt to buy the company.

KHC also announced on Sunday that Sarmad Zok, who has overseen its hotels business for more than two decades, is resigning as a director. He'll be replaced by Abdulmajeed Alhagbani, head of Middle East and North Africa securities investments at the PIF.

The investment firm said in a separate filing that one of its executive directors, Sarmad Zok, had resigned. Abdulmajeed Ahmed Al-Hagbani will replace him on the board, as a non-executive director. Hagbani is a senior director at PIF, according to LinkedIn.

With inputs from Reuters