Saudi Arabia is a private financier of the £4bn Selfridges takeover, as part a spree to boost its international standing.
Sources in City revealed that the £500bn Public Investment Fund of the Kingdom, which is the sovereign wealth fund of the Kingdom, acquired an interest via Signa Holding Austrian property company, in the historic department stores.
The PIF supported the Signa Fund, which acquired a 50% stake in Selfridges in August last year. Signa was in an equal partnership with Central Group, a Thai retailer. Signa’s contribution to Saudi Arabian Finance was a minority.
The two won an auction that was launched by the Weston Family after the death of Galen Weston. Signa and Central won the auction with a £4bn offer, beating out Qatar’s sovereign fund.
Signa is owned by Rene Benko. He has been identified by Austrian prosecutors in an ongoing investigation into political corruption. He has denied all wrongdoing. Signa Sports is an online retailer of sportswear that will list in New York by 2021. The PIF invested in Signa Sports in the past.
PIF has made a number of high-profile UK investments, including acquiring majority ownership in Newcastle United by 2021. Last year it became the second largest shareholder in Aston Martin.
Signa’s involvement in the PIF’s purchase of Selfridges highlights Saudi Arabia’s use of intermediaries, including Softbank (the Japanese technology giant) and its Vision Fund.
The PIF is Saudi Arabia’s de-facto ruler Crown Prince Mohammed bin Salman’s (MBS) main vehicle for maximizing the returns from the massive oil revenues of the country and gaining expertise to drive economic growth. The PIF has stakes in a variety of Western technology, entertainment and financial institutions.
MBS is using PIF’s power to boost the Kingdom’s standing internationally. This invitation to visit the UK this autumn comes despite the US assessment that he had approved the murder of journalist Jamal Khashoggi in 2018.
He has invested hundreds of millions in Neom, an urbanisation project which includes The Line, a “linear city” that is 170km long and 200m wide. The Kingdom wants to attract famous restaurants and retailers.
Saudi Arabia also spends heavily on sports, including football, golf and cricket, via the controversial LIV tour . is funding a new airline that will compete with regional rivals Emirates and Qatar Airways.
The PIF’s interest in Selfridges is a new front for the bitter rivalry between Saudi Arabia, which owns Harrods, the long-time London rival of the department store.
Harrods, now in Qatari ownership, has expanded internationally, opening stores at airports, in China, and even in China. Selfridges was founded in 1908 and has yet to expand outside of the UK.
Signa and Central piled on extra debt through a structure that separates Selfridges retail business from its property. Bangkok Bank London provided a £1.7bn loan secured by the freehold of their flagship London store. EFG Bank, a Swiss lender, also provided a loan for the funding of this deal. It was secured by Selfridges Exchange Square in Manchester.
Such debt structures not only provide capital for acquisitions, but can also increase returns. However, they can also increase the financial risk of a business. This is especially true when interest rates rise.
Selfridges’ retail business, in its latest accounts for the year ending January 2022 reported a significant increase in sales as customers returned to Selfridges after the pandemic. The revenues rose by 28pc, to £653m. However, they were still PS200m below their pre-Covid peak. Selfridges said that it had the best Christmas in its history last year.
The PIF declined comment. Signa confirmed that the PIF was interested and stated it did not intend to sell any part of its Selfridges stake.
Signa’s spokesman stated: “The ownership has not changed.”
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