Qataris snap up Harrods for bargain £1.5bn

Al-Fayed sells the landmark store to 'have more time with his family' as the Gulf state goes on another spending spree in London

His life-size waxwork statue greets shoppers at the famous department store, but that could soon be the nearest Mohamed al-Fayed comes to a physical link with Harrods after his £1.5bn deal to sell the Knightsbridge shop to the Qatari royal family.

The sale brings the curtain down on a colourful 25 years for Harrods, which the Egyptian tycoon acquired in 1985. Despite recently insisting the business was not on the market, Mr Fayed revealed yesterday that, at 77 years old, it was time to spend more time with his four children, including Camilla al-Fayed, and three grandchildren. He will become Harrods' honorary chairman but will not have a direct hand in running the store.

The new owners are buying the store through Qatar Holding, the investment arm of Qatar Investment Authority, which trades on behalf of the oil-rich Gulf state. Sheikh Hamad al-Thani, the Qatari prime minister (pictured right with Mr Fayed), who chairs Qatar Holding, pledged to make Harrods "even greater and better". He said the responsibility of owning "a very important monument [was a] heavy burden", adding: "It's a historical place. I know it's important, not only for the British people but it is important for the tourism."

Mr Fayed's volte-face comes barely weeks after he claimed he had put "two fingers up" to potential Harrods suitors. He had previously said he planned to own the business for the rest of his life – and maintain his link with the store for even longer by being first mummified and then buried in a mausoleum on the store's roof when he died. But it emerged yesterday that the Egyptian, who was snubbed in his quest for British citizenship, had spent the past few months touting around the business, which is being sold along with its property arm, Harrods Estates, and its charter aircraft service, Air Harrods.

The store's customers, who include some of the world's richest people, were shocked at the news. Colin Bell, 42, said: "Wow, I'm really surprised. Harrods is like his statement in London. Maybe he's selling it in protest; he's tried to get citizenship for so long now, it's really shocking that he still hasn't."

The west London landmark is a major tourist destination; visitors flock as much to marvel at its ornate façade and leave with one of its green-and-gold carrier bags as to do a serious shop. It also attracts celebrities: Amanda Holden opened the Harrods sale last Christmas, and Jennifer Aniston is launching her new perfume line there next month.

Ken Costa, the chairman of the investment bank Lazard International, which advised on the deal, said Mr Fayed had plumped for the Qataris, who are thought to have invested more than £10bn in Britain in recent years, because they would "maintain the legacy and traditions of Harrods". But it was unclear whether this extended to maintaining the many personal touches Mr Fayed has added to the 160-year-old store during his ownership, which include a shrine to his late son Dodi and Princess Diana, and having his features imposed on the sphinxes in the store's Egyptian Room.

Qatar Holding said it would retain Harrods' existing staff, including Michael Ward, its managing director. Its decision to buy a trophy asset is a big departure from the investment fund's usual strategy, but Sheikh Hamad said the store's "good and stable" cashflow made it a good purchase.

Despite Mr Fayed's wish for more family time, he is not looking to sell Fulham, the football club he has owned since 1997. Qatar Holding has yet to add football to its sprawling portfolio, but reports have linked the Gulf state's royal family with Everton.

The Qataris are only Harrods' fifth owners since Charles Henry Harrod opened his shop in 1849. Mr Fayed and his brother Ali acquired Harrods for £615m in 1985, but only after a vicious public feud with Tiny Rowland, who asked the Department of Trade to probe the deal. The subsequent inquiry found that the Fayeds had lied about their background and their wealth to support their takeover bid. A report in 1990 said: "We are satisfied that the image they created between November 1984 and March 1985 of their wealthy Egyptian ancestors was completely bogus."

The big spenders

The £1.5bn the Qataris have paid for Harrods isn't quite pocket change for them, but not far from it. The store is the latest in a series of eye-watering deals that have seen the Gulf state become a major investor in the UK.

Buoyed by high gas prices – Qatar is said to possess up to one-third of the world's known gas reserves – it has gone on a spending spree to diversify its economy. Qatar continued to snap up foreign assets, particularly big stakes in European banks, throughout the global economic crisis.

Last year alone, the Qatar Investment Authority (QIA) invested more than $30bn (£20bn) in deals around the globe. In Britain it has a significant stake in Sainsbury's and Barclays Bank, and is the biggest shareholder in the company that owns the Canary Wharf office complex. Other high-profile deals include a stake in VW-Porsche and the luxury hotel chain Fairmont, which includes the famous Raffles hotel in Singapore.

Lucy Chamberlin

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