The brothers are, however, keeping the flagship Harrods store in Knightsbridge, which is widely viewed as the jewel in the House of Fraser crown. It is also the key reason for the long-running dispute between the Fayeds and Tiny Rowland's Lonrho, which wanted to acquire the group.
A spokesman for the group said Mohamed al-Fayed - who is often seen serving behind counters at the store - 'loves Harrods too much to contemplate selling it'.
The announcement follows months of speculation that the Fayeds were under pressure to sell assets to repay some of their debts. The brothers have already suffered a pounds 60m loss on the disposal of a 10.6 per cent stake in Sears, and are believed to have been trying to sell other assets - including the Harrods depository at Barnes. Some of the directors of House of Fraser had also attempted to put together a management buyout for the group, but it is believed the price offered was too low.
A spokesman for the group denied that lenders had forced the disposal, although he added that some of the proceeds will be used to repay the loans.
Ali al-Fayed, who stepped down as chairman yesterday ahead of the float, added: 'We believe the full potential of the company will be realised most swiftly and most effectively if it returns to its former status of an independent, publicly held company.'
House of Fraser Holdings, which owns the stores group, would not disclose the level of borrowings. But a spokesman said that pounds 200m had been repaid this year and the proceeds of the float would be enough to repay the remainder. In the last published accounts, for the year to 25 January 1992, the group had pounds 775.9m of debt.
The flotation, to be sponsored by the merchant bank SG Warburg, is planned for next spring and no formal valuation has yet been carried out. But directors of the stores group indicated that they would expect it to fetch between pounds 350m and pounds 550m.
The plans have enticed Brian McGowan, one of the creators of the conglomerate Williams Holdings, out of retirement after only seven weeks to be non-executive chairman. 'I was interested in the prospect of a float, which is meat and drink to me, and I recognised House of Fraser as a business of quality,' he said. A number of other non-executive directors will be appointed.
In the year to January 1993, it made pounds 36.8m operating profit on sales of pounds 700m and the group said that sales so far this year are 'several per cent' ahead of last year.
The level of debt that will be carried by the group at flotation has not yet been decided, but Mr McGowan said it would be set at a level the group could afford.
The House of Fraser group, which includes Dickins & Jones, Barkers, DH Evans and Army & Navy as well as Frasers, has been dogged by controversy since the Fayed brothers acquired it for pounds 615m in 1985. That sparked a long-running campaign by Mr Rowland - who tried to acquire the group in 1981 - to have the deal unwound.
The Fayeds intend to dispose of their entire holding in the 59-strong chain but will retain a number of other assets, including Turnbull & Asser, the shirtmaker, Kurt Geiger, the shoe chain, and the Carlton Highland hotel in Edinburgh.
View from City Road, page 26.