SARAJEVO (Reuters) - An Austrian fund backed by British American Tobacco (BATS.L) agreed to increase its stake in Bosnian holding firm Fabrika Duhana Sarajevo (FDS) FDSS.SJ to 78.8 percent, paving the way for BAT to acquire FDS's tobacco assets.

Austria's CID Adriatic Investments (CID) said it bought an additional 38.8 percent stake in FDS from small shareholders and funds for 41.6 million Bosnian marka ($22.2 million), having previously acquired a 39.9 percent stake from a Bosnian regional government, using financing provided by BAT in both cases.

"Upon successful completion of the takeover bid, CID will enter exclusive negotiations with the BAT on the sale of the FDS tobacco business," the fund said in a statement, adding that the deal would be subject to a vote by the FDS shareholders, due diligence by BAT and other regulatory approvals.


FDS has banking and real estate operations as well as tobacco interests.

CID had bid for the entire outstanding 60.1 percent stake in FDS, which is owned by local subsidiaries of Austria's Raiffeisen Bank (RBIV.VI) and Italy's UniCredit SpA (CRDI.MI) as well as investment funds and small shareholders.

The fund had bid 83.5 marka a share for the stake, the same price it paid for the regional government's stake in September.

FDS's shares were trading at 80 marka on Wednesday, unchanged from Tuesday's close. The shares have risen by nearly a quarter since CID's purchase of the regional government's stake in FDS. The company has a market capitalization of 102.7 million marka.


(Reporting by Maja Zuvela; Editing by Louise Heavens)