Saudi Arabia has emerged as a private financial backer of the £4bn takeover of Selfridges, as part of a shopping spree intended to increase its international clout and boost development of its economy.
The Kingdom’s sovereign wealth fund, the £500bn Public Investment Fund (PIF), acquired an interest in the historic department store via the Austrian property company Signa Holding, City sources revealed.
The PIF backed the Signa fund that acquired a 50pc stake in Selfridges last August. Signa swooped in equal partnership with the Thai retailer Central Group. Saudi Arabian finance represented a minority of Signa’s contribution.
The pair won an auction launched by the Weston family, owners of Selfridges since 2003, prompted by the death of Galen Weston, the patriarch. Signa and Central’s £4bn bid came out ahead of competition from Qatar’s sovereign wealth fund.
Signa is controlled by the billionaire René Benko, who has been named by Austrian prosecutors as a suspect in a long-running political corruption investigation. He has denied any wrongdoing. The PIF previously invested in Signa Sports, an online sportswear retailer which listed in New York in 2021.
The deal for Selfridges would complete a trio of high-profile investments in the UK by the PIF, after it acquired majority ownership of Newcastle United in 2021 and last year became the second-largest shareholder in Aston Martin.
The PIF’s interest in Selfridges via Signa highlights the way Saudi Arabia is using intermediaries – most famously including the Japanese technology powerhouse Softbank and its Vision Fund – to deploy some of its vast wealth.
The PIF is the spearhead of efforts by Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman (MBS), to seek higher returns on the country’s massive oil revenues and gain expertise to drive economic development. It has taken stakes in an array of major Western technology and entertainment companies, and financial institutions.
MBS, who has been invited to visit the UK in autumn despite an assessment by the US that he approved the 2018 murder of the journalist Jamal Khashoggi, is using the PIF’s firepower to improve the Kingdom’s international standing.
He is ploughing hundreds of billions into Neom, a vast urbanisation project that includes a 170km-long, 200m-wide “linear city” in the desert called The Line. The Kingdom aims to attract famous retailers and restaurants.
Saudi Arabia is also spending heavily to bring sports including football, cricket and golf, via its controversial LIV tour, to the Kingdom. It is also funding a new flag carrier airline to take on regional competitors Emirates and Qatar Airways.
The PIF interest in Selfridges opens a new front to the fierce rivalry between Saudi Arabia and Qatar, which owns the department store’s longstanding London competitor Harrods.
In Qatari hands, Harrods has pursued international expansion, opening stores in airports and in China. Selfridges, founded in 1908, is yet to operate outside the UK.
Signa and Central loaded it up with extra debt under a structure which separates Selfridges’ property from its retail business. The London branch of Bangkok Bank provided a loan of £1.7bn that is secured against the freehold of its flagship London store. The Swiss lender EFG Bank also provided a loan to help fund the deal, secured against Selfridges’ Exchange Square site in Manchester.
As well as providing capital for an acquisition, such debt structures can substantially increase returns. They can also impose higher financial risks on a business, however, particularly when interest rates are rising.
In its most recent accounts, for the year to the end of January 2022, Selfridges retail business reported a sharp increase in sales last year as shoppers returned after the pandemic. Revenues rose 28pc to £653m, although remained £200m short of their pre-Covid peak. Selfridges has since said it had its best Christmas ever last year.
The PIF declined to comment. Signa confirmed the PIF’s interest and said it had no intention to sell any portion of its stake in Selfridges.
A Signa spokesman said: “The ownership of Selfridges has not changed.“
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Source: https://finance.yahoo.com/news/revealed-saudi-oil-wealth-backed-050331726.html