Saudi oil wealth backed Selfridges £4bn takeover

De facto ruler, Crown Prince Mohammed bin Salman

The de facto ruler, Crown Prince Mohammed bin Salman, wants to strengthen the international weight of Saudi Arabia – BERTRAND GUAY/AFP via Getty Images

Saudi Arabia has become a private backer of the £4billion takeover of Selfridges, part of a shopping spree aimed at increasing its international influence and boosting the development of its economy.

The Kingdom’s sovereign wealth fund, the £500bn Public Investment Fund (PIF), has acquired a stake in the historic department store through Austrian property company Signa Holding, city sources have revealed.

The PIF has backed the Signa fund which acquired a 50% stake in Selfridges last August. Signa has entered into an equal partnership with Thai retailer Central Group. Saudi finance represented a minority of Signa’s contribution.

The pair won an auction launched by the Weston family, owners of Selfridges since 2003, following the death of Galen Weston, the patriarch. Signa and Central’s £4bn bid beat out competition from Qatar’s sovereign wealth fund.

Signa is controlled by billionaire René Benko, who has been named by Austrian prosecutors as a suspect in a long-running investigation into political corruption. He denied any wrongdoing. PIF previously invested in Signa Sports, an online sportswear retailer that listed in New York in 2021.

The deal for Selfridges would complete a trio of top UK investments by the PIF, having acquired the majority stake from Newcastle United in 2021 and last year became Aston Martin’s second largest shareholder.

The PIF’s interest in Selfridges via Signa highlights how Saudi Arabia is using intermediaries – including Japan’s tech powerhouse Softbank and its Vision Fund – to deploy some of its vast wealth.

selfridges store london

Selfridges has been sold by the Weston family in a £4billion deal – Jonathan Brady/PA Wire

The PIF is spearheading efforts by Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman (MBS), to seek higher returns on the country’s huge oil revenues and gain expertise to spur economic development. He has taken stakes in a range of major Western technology and entertainment companies and financial institutions.

MBS, who was invited to visit the UK in the fall despite an assessment by the US that it approved of the 2018 murder of journalist Jamal Khashoggi, is using the firepower of the PIF to improve the Kingdom’s international standing.

He is investing hundreds of billions in Neom, a vast urbanization project that includes a 170 km long and 200 m wide “linear city” in the desert called The Line. The Kingdom aims to attract famous retailers and restaurants.

Saudi Arabia is also spending heavily on bringing sports such as football, cricket and golf, via its controversial LIV tour, to the Kingdom. It is also funding a new flag carrier to take on regional rivals Emirates and Qatar Airways.

The PIF’s interest in Selfridges opens a new front in the fierce rivalry between Saudi Arabia and Qatar, which owns the department store’s longtime London competitor, Harrods.

Qatari-owned, Harrods continued its international expansion, opening stores at airports and in China. Selfridges, founded in 1908, is not yet active outside the UK.

Signa and Central have burdened him with additional debt as part of a structure that separates ownership of Selfridges from its retail business. The London branch of Bangkok Bank has provided a £1.7 billion loan secured by the freehold of its London flagship store. Swiss lender EFG Bank also provided a loan to help fund the transaction, secured by Selfridges’ Exchange Square site in Manchester.

In addition to providing capital for an acquisition, such debt structures can significantly increase returns. However, they can also impose higher financial risks on a business, especially when interest rates rise.

In its most recent accounts, for the year ending late January 2022, the Selfridges retail business reported a surge in sales last year as shoppers returned after the pandemic. Revenue rose 28% to £653m, although it remained £200m below its pre-Covid peak. Selfridges has since said it had its best Christmas ever last year.

The PIF declined to comment. Signa confirmed PIF’s interest and said he had no intention of selling any part of his stake in Selfridges.

A Signa spokesperson said: ‘The ownership of Selfridges has not changed.

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