(Adds deal value, background)
NAIROBI, April 1 (Reuters) - Kenya's TransCentury said on Tuesday that it has sold its 34 percent stake in Rift Valley Railways (RVR) to Egyptian private equity firm Citadel Capital.
Citadel said it bought the shares for $37.8 million, raising its stake to 85 percent. Uganda's Bomi Holdings owns the rest.
RVR, operator of the sole rail line linking Kenya's Indian Ocean coast with Uganda, is set to face competition from a new railway in the coming years after the Kenyan government broke ground on building a standard-gauge line from the port city of Mombasa to the Ugandan border in November last year.
Rail transport in the east African nation accounts for only 1 million tonnes of the 20 million tonnes of cargo that passes through the port of Mombasa to the region every year.
Citadel, which first bought a stake in RVR in 2010, said it had improved the colonial-era rail line but businesses and passengers say train speeds remain far too slow, hurt by decades of neglect, theft and underinvestment by successive governments. ($1 = 86.3000 Kenyan Shillings) (Reporting by Drazen Jorgic in Nairobi and Shadia Nasralla in Cairo; Editing by Duncan Miriri and David Goodman)