The reconciliation, which Mr Rowland said had been brokered by Bassam Abu Sharif, a Palestine Liberation Organisation official, heralded peace in an eight-year war of words and writs between Mr Rowland and the three Egyptian Fayed brothers. It also signalled the end of the 75-year-old tycoon's 16-year struggle for control of the store.
Harrods is the jewel in the crown of the House of Fraser chain that was snatched from under Lonrho's nose in a pounds 615m takeover in 1985. Mr Rowland had wanted to buy the stores, but was trumped by the Fayeds - unfairly, he has claimed ever since.
The two companies said in a joint statement that in a spirit of 'mutual forgiveness' they had ended their legal disputes and would seek dismissal of any pending litigation between them, with each side bearing its own costs, which run into millions. Mr Rowland is also likely to drop actions against the Department of Trade and Industry and Lord Tebbit, who was Secretary of State at the time.
Mr Rowland claimed that the settlement was engineered behind the backs of the Lonrho board and Dieter Bock, the German financier who has an 18.8 per cent stake in the company. 'Dieter Bock had no idea we were doing this deal, neither did any of the board,' Mr Rowland said.
Mr Fayed and Mr Rowland strolled to a food counter and shook hands, and Mr Fayed put his arm around Mr Rowland's shoulder. 'If the Israelis and the Palestinians can make up so can the Egyptians and the Germans,' said Mr Fayed, referring to Mr Rowland's antecedents. The two men lowered a model shark labelled 'Tiny' that has hung in the food hall.
Mr Rowland said later that the PLO offcial had said to him: 'It's ridiculous to me that Arafat (the PLO chairman) and Rabin (the Israeli prime minister) can get together and you can't get together with Mohamed al-Fayed.'
Mr Bock, now Mr Rowland's co-chief executive, has made it clear that he believes the fight over House of Fraser to be a waste of time and money that should be ended as soon as possible.
The truce came three days after Mr Bock shifted the balance of power on the Lonrho board away from Mr Rowland by pushing through the appointment of non-executive directors for the first time in 20 years. Shortly afterwards the board named two independent trustees to help to oversee its pension scheme, another Bock objective.
The dispute has involved countless writs, a number of court hearings - including an appeal this summer that gave Lonrho the right to sue the Fayeds - large amounts of research by Lonrho into the background and history of the brothers, and a Department of Trade and Industry inspectors' report. This was published in 1990 after the Observer - then owned by Lonrho - had printed large parts of it.
Mr Rowland's arrival at Harrods came within hours of an announcement that he is dropping legal actions against Kleinwort Benson, the City merchant bank which advised the Fayeds in their takeover of House of Fraser, and John MacArthur, a Kleinwort director.
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