Harrods, the world famous department store in Knightsbridge, London has been sold by the mercurial Mohamed Al Fayed to Middle Eastern investors for around £1.5bn.
The sale to the Qatari royal family's Qatar Holding group was confirmed today after months of on-off negotiations brokered by the leading City banker Ken Costa, the chairman of Lazard International.
The deal was signed by Fayed and Qatar Holding's chief executive, Ahmad Al-Sayed, at the Qatari embassy in Mayfair, bringing to an end months of speculation in the City about the future of the luxury emporium.
After 25 years as owner, Fayed, 77, who also owns Fulham football club, has relinquished all of his financial interest in the store, which is held through a family trust based in the tax haven of Bermuda.
A statement from Lazard said Fayed was retiring "to spend more time with his children and grandchildren", but will take on the role of honorary chairman following the sale. The Qataris intend to retain the services of the current managing director, Michael Ward, and his team.
Qatar Holding is interested in developing Harrods' potential as a global luxury brand name and expanding worldwide sales over the internet. "This kind of asset only comes once in a lifetime," said one source close to the deal. It is a trophy asset of immense value and prestige."
Sayed said: "It is a privilege for us to acquire Harrods ... This acquisition further expands our global portfolio of world-leading companies."
The deal comes despite denials from Fayed as recently as March that the London landmark store was for sale. Harrods has, however, repeatedly been the subject of takeover rumours. In 2002 John Ritblat, the then-chairman of British Land, offered to buy Harrods from Fayed and lease it back to him. It has also been linked to Dickson Poon, the owner of the rival Knightsbridge luxury shop Harvey Nichols.
It is not clear whether Qatar Holding approached Fayed or the other way around, but it is thought Fayed had hoped to get around £2bn from the sale.
Trade at Harrods has defied the recession as rich tourists have flocked to the capital, attracted by the weakness of the pound, which makes British goods cheaper for overseas buyers. Sales hit a record £752m in the year to January 2009, the latest figures available. Profits dropped 15% to £50.3m but that was largely due to a refurbishment programme, including £2.5m of repairs to the distinctive terracotta facade, which is listed by English Heritage.
Costa said Fayed wanted to ensure that a new owner, only the fifth since the store opened in 1840, would carry on its tradition and legacy. "Qatar Holding was specifically chosen by the trust, as they had both the vision and financial capacity to support the long term successful growth of Harrods."
The Harrods purchase adds to the tiny emirate of Qatar's already extensive portfolio in the UK. Unlike its brash neighbour Dubai, Qatar has escaped the worst ravages of the credit crunch thanks to its natural gas resources. Its emir, Hamad bin Khalifa al-Thani, is keen to use its oil and gas wealth to diversify the economy.
Dr Hussein Ali Al-Abdulla, the vice-chairman of Qatar Holding, said: "Our latest acquisition is truly magnificent. Such a rare opportunity does not arise every day and today we celebrate this landmark transaction."
Qatari investments in Britain include stakes in Barclays Bank, the London Stock Exchange, J Sainsbury PLC, Songbird Estates, which controls the Canary Wharf Group, and the troubled care home group Four Seasons.
Qatari sovereign wealth funds control assets estimated at more than $60bn. Elsewhere in Europe, they hold stakes in the Swiss bank Credit Suisse and the luxury car brand Porsche, which is being merged with its fellow German car maker Volkswagen.
Investment activity by the Qataris is likely to step up a gear following the emir's recent appointment of the top US dealmaker Anthony Armstrong from Credit Suisse. He now runs an acquisitions department for Qatar Holding. The UK is seen as a prime target, thanks to our lack of restrictions on overseas bidders, though the takeover of Cadbury by US conglomerate Kraft has led to calls for curbs.
