Commonwealth Bank of Australia (CBA) has agreed to sell a 55% stake in its investment arm Colonial First State (CFS) to US-based private equity firm KKR.

Under the deal terms, CBA will receive A$1.7bn ($1.1bn) in cash proceeds from KKR for acquiring 55% stake.

CFS’ 100% stake is valued at A$3.3bn ($2.13bn) on pro forma basis.

KKR is a global investment firm with $207bn in assets under management (AUM) as of 31 March 2020. The investment in CFS will come from its Asian private equity fund.

KKR Australia partner and head Scott Bookmyer said: “Partnering alongside CBA, we look forward to accelerating CFS’s transformation and further strengthening its market position to deliver long-term benefits to its member base.”

The deal is expected to provide CFS’ over one million Australian members with a suite of substantial benefits.

The benefits include a simplified product offering, improved services, modernised technology systems and better access to education, support and self-service tools.

CFS COO Michael Venter said: “Further investment over the coming years will result in better member experience and we expect the investment will deliver a wide range of benefits for all of our stakeholders.”

The stake sale is in line with CBA’s strategy to focus on its core banking businesses while allowing CFS to become a standalone business.

CBA CEO Matt Comyn said: “We are confident that together with KKR, we can provide CFS with an increased capacity to invest in product innovation, new services and its digital capabilities.”

The deal is expected to be completed by the first half of next year.