Al Fayed bows out selling Harrods for £1.5 bn to Qatari royal family

IT WAS the shining jewel in the crown of tycoon Mohamed al Fayed's sprawling business empire and represented his most audacious attempt to enter the heart of the British establishment.

•Mohamed al Fayed (right) former owner of Harrods department store with the Prime Minister of Qatar

But now, after promising never to sell, the Egyptian-born retailer has finally parted company with Harrods, the world's most famous department store, in a 1.5 billion deal with the Qatari royal family.

Observers of al Fayed's colourful life and times were shocked at the sale yesterday as his epic battle for ownership of the London store with fellow tycoon Tiny Rowland in the 1980s was one of the bitterest in corporate history.

However, the massive sum offered by the Qataris appears to have been too much for the Egyptian businessman, who also owns a Highland estate and Fulham FC, to turn down.

The sale could also represent the closing chapter in 77-year-old al Fayed's struggle to be fully accepted by the British elite. His application for British citizenship has been repeatedly turned down. Al Fayed, who, such is his attachment to the store, previously said he would like to be buried at the site, claims he simply wants to retire to spend more time with his grandchildren.

Announcing the sale yesterday, Ken Costa, the chairman of Lazard International, the investment bank advising the Qatari royal family trust on the deal, said: "After 25 years as chairman of Harrods, Mohamed al Fayed has decided to retire and to spend more time with his children and grandchildren.

"He has built Harrods into a unique luxury brand with worldwide recognition. In reaching the decision to retire, he wished to ensure that the legacy and traditions that he has built up in Harrods would be continued, and that the team that he has built up would be encouraged to develop the foundations that he has laid."

Qatar Holding (QH) will become only the fifth owner of Harrods since its creation in 1840. Costa said: "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. Of paramount importance to Mohamed al Fayed was to ensure that the Harrods staff would find in QH an owner who would be supportive of their efforts to maintain the traditions of Harrods."

For QH, Harrods represents the most high-profile of its many acquisitions in the UK. It has a stake in Sainsbury's and previously invested in Barclays Bank before selling its shares last year.

QH has also put funds into Songbird Estates, which owns most of Canary Wharf. Qatari Prime Minister Sheikh Hamad Bin Jassim Bin Jabr Al-Thani was given a short tour of the store yesterday by al Fayed, who will remain as honorary chairman. He said he was "very happy with the transaction", and continued: "It's a historical place. I know it's important, not only for the British people but it is important for the tourism.

"What I can assure you is that Qatar Holding will do their best to upgrade this monument to make it even greater and better for the tourism and also for the British people."

Asked if he had ever shopped at Harrods, he joked: "If the shop will have customers like me I don't think Harrods will make profit, but maybe if it's my wife, yes."

The sale comes after it emerged that al Fayed had received an unsolicited approach for Harrods in March. At the time he tried to reassure staff that the store in London's Knightsbridge area was not for sale.

Harrods, which extends over seven floors, has more than 15 million customers passing through its doors each year. It was bought by al Fayed in 1985 for 615 million and ever since the retailer has been regularly linked to talk of takeovers. In 2002, John Ritblat, then chairman of British Land, offered to buy Harrods from al Fayed and lease it back to him. However, the offer was rejected.

In 2003, it was suggested that al Fayed wanted to put the store on the market. It was linked to Harvey Nichols' owner Dickson Poon and investment bank Lazards, which was reported to be working on a deal to merge Harrods with Selfridges, the rival department store.

Yesterday's sale will include all parts of the Harrods group, including Harrods Estates, the property arm of al Fayed's business empire. However, his Scottish castle and estate, which is run as a separate company, remains unaffected.

At the Balnagown Estate in Easter Ross there was surprise at the Harrods announcement. However, a source said it was "business as usual" at the estate, bought by al Fayed in 1972 after he fell in love with the famous "pink castle" during a brief visit.

Al Fayed has spent an estimated 20m restoring the castle and estate and was awarded the Freedom of the Highlands by the Scottish Tourist Board for his contribution to the area.

He has vowed to come and live at Balnagown permanently but only if Scotland becomes an independent country.

A source at the estate said yesterday: "We only found out about the Harrods sale at the same time as everyone else yesterday and there is certainly no impact here. It is business as usual."