Bloomberg News

Qatar’s Harrods Purchase Adds to Emirate’s British Investments

May 08, 2010

The purchase of Harrods Ltd. by Qatar Holding LLC adds London’s best-known luxury store to the emirate’s British investments ranging from the Canary Wharf banking district to the London Stock Exchange.

The sovereign-wealth fund paid Mohamed Al-Fayed, owner of the store company, 1.5 billion pounds ($2.2 billion), two people familiar with the transaction said yesterday. They declined to be identified because the terms weren’t disclosed.

The landmark Harrods store in Knightsbridge, which opened in 1849, counted Sigmund Freud and Oscar Wilde among customers, and sells goods from Christian Dior fashions to gold bars. In addition to its stake in Songbird Estates Plc (SBD), which controls more than half the buildings in Canary Wharf, Qatar is the biggest shareholder in Barclays Plc and the J Sainsbury Plc supermarket chain. The fund is also the second-largest investor in London Stock Exchange Group Plc. (LSE)

“Investors from the emerging markets are coming to Europe because that’s where the most important opportunities for brands are,” said Luca Solca, a London-based analyst at Sanford C. Bernstein.

The Qatar fund has added to its purchases as stock markets tumbled. Sovereign wealth funds in Asia, Europe, the Middle East and Africa increased assets by 19 percent in the nine months through September 2009, according to a survey of 12 clients by State Street Corp., the world’s third-largest custody bank.

Qatar also has a stake in Volkswagen AG, the German automaker.

Al-Fayed

The emirate’s investment company bought Harrods from the family trust of Mohamed Al-Fayed, which was advised by Lazard & Co. Qatar Holding was advised by Credit Suisse Group.

Al-Fayed, 77, will retire. He will become honorary chairman of Harrods, Qatar Holding Chief Executive Officer Ahmad M. Al Sayed said yesterday. The Egyptian-born businessman also owns west London’s Fulham Football Club. His other interests in the U.K. include VIP helicopter charter and private banking. His son, Dodi, was killed with Princess Diana in 1997 in a car crash in Paris.

“There are many elements of Harrods that are related to Al-Fayed,” said Solca. “With the new owners, there’s an opportunity to give a more modern approach and concept to the store. Other London stores, Harvey Nichols and Selfridges, are doing much better in terms of their offer and format of luxury goods.” Al-Fayed bought Harrods in 1985.

Liberty Bids

Today’s sale follows an announcement this month by Liberty Plc, the 135-year-old U.K. luxury retailer, that it received approaches about a possible offer from BlueGem Capital Partners LLP as well as from an unidentified third party.

U.K. retail spending is recovering after the worst recession on record drove unemployment to a 16-year high in the quarter through February. A gauge of U.K. retailing stayed positive in April as expectations of sales rose to a five-month high, the Confederation of British Industry said.

The FTSE 350 General Retail Index has declined 8 percent this year, compared with a 4.5 percent retreat for the overall 350-stock index. The benchmark FTSE 100 Index is down 5.4 percent.

Al-Fayed’s retirement brings to an end a career marked by battles, including one with his former business partner Roland “Tiny” Rowland, whom he defeated to buy Harrods, and lawsuits involving politicians including Neil Hamilton.

Hamilton Case

In 1999, Hamilton lost a libel lawsuit against Al-Fayed, which he brought after the Egyptian said on television he’d paid the former Conservative legislator to raise issues in Parliament.

The five-week trial was followed by British newspapers and television amid emotional outbursts and allegations from both sides in court. Al-Fayed was scolded by the judge several times for making speeches while under questioning, and at one point was brought to tears when asked about the U.K. government’s repeated decision not to grant him a passport. He had been seeking British citizenship since 1995.

Earlier that year, Al-Fayed lost a High Court challenge against then Home Secretary Jack Straw’s ruling that he wasn’t of the necessary “good character” to be granted British citizenship.

As the Harrods sale was announced, the store’s website was advertising sunglasses.

“There’s no real logic to diamond-encrusted sunglasses,” the statement said, next to a black and white photo. “But with 206 of Bulgari’s pave diamonds set in 18 carat gold, who needs logic?”

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net


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