pounds 2bn float may be in store for Harrods

Expansion plans: Fayed brothers review options to finance move into hotels and housing

Knightsbridge shoppers who made absolutely fabulous profits on the flotation of Harvey Nichols in April could soon be adding Harrods to their portfolio if the famous London store goes ahead with plans to gain a stock market quote.

The business, owned by the controversial Fayed brothers, is seeking new money for an ambitious diversification into hotels and housing costing several hundred million pounds. Given the market's current love affair with department stores, Harrods is expected to be valued at over pounds 2bn if it gains a listing in both London and New York.

The company would not confirm that it had appointed US investment bank Lehman Brothers to handle the float, but it is known that it has taken on Sir Tim Bell's Lowe Bell financial public relations company, which is experienced at bringing companies to market.

A Harrods spokesman said yesterday: "At the conclusion of another successful year of trading, Harrods confirms that it is reviewing a number of options for the next stage of its planned expansion. As yet, no firm decisions have been made and there is no timetable. In the event that a public offering is chosen as an option, an appropriate announcement will be made."

The group, which includes a string of shops within shops in Japan and upmarket shirtmaker Turnbull & Asser, is understood to have made profits of between pounds 71m and pounds 73m in the year to January, up from pounds 56m before. One insider suggested "it would not be fanciful" if it was making pounds 100m by the year 2000.

If Harrods does come to market, it will mark an amazing rehabilitation for the Fayeds, who were accused in a Department of Trade and Industry report of having "misrepresented their origins, wealth, business interests and resources" before they took control of Harrods and the since-floated House of Fraser stores group. In 1994, they appeared to lose their last chance of clearing their names when the European Court of Human Rights rejected a claim that the report had violated their rights.

Harrods' expansion plans cover two of its depositories now no longer used for their original purpose of storing furniture. At Trevor Square, hard by the main Knightsbridge store, the group has gained planning permission to convert the seven-storey warehouse into a 144-room five-star hotel modelled on the Ritz in Paris, one of Mohamed Al Fayed's other assets on which he spent $150m in the 1980s. At present the only residents of the store are the eight Friesian stallions which pull Harrods' carriages and delivery vehicles to its royal and other customers.

The other main redevelopment prospect is the depository and 11 acres in Barnes, west London, where the company has put in a planning application for 250 high-quality houses and flats.

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