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Index to British press articles on the Fayeds' purchase of Harrods

This was the first study of Mohamed 'Al' Fayed's assets to be published by any newspaper - including The Observer.  Compiled by The Guardian's financial journalists Andrew Cornelius, Geoffrey Gibbs, and Mary Brasier, it concurred with The Observer's own articles by casting further serious doubts on the Fayed brothers' stories about their wealth and background.  However, despite the rightness of their research, and the opportunity that this afforded The Guardian to probe the Thatcher Government's handling of the sale, this was The Guardian's only article to question the Fayeds' claims prior to the publication of the DTI report five years later.

The Guardian 
Thursday, 21 March 1985

The Egyptian Al-Fayed brothers have trumped Lonrho, avoided the Monopolies Commission, and walked through the doors of Harrods.  At a cost of £615 million they now control Britain's most famous department store, as well as a hundred others -- like Army and Navy, Rackhams and Binns -- around the country. 
    How have they generated cash necessary to buy the House of Fraser group?  That the funds are available is not the question.  But the nature and extent of their business interests around the world remains something of a mystery.  All the assets that have been identified are on a much smaller scale than would be likely to generate cash on the scale that is available.
    When a major British company receives a takeover bid the normal British practice would be for the merchant bank representing the bidder to make available detailed information about the people making the bid.  There is no legal requirement for this; and, under the Takeover Code, the only requirement is for the merchant bank to satisfy itself that the funds are indeed available.  But because a merchant bank puts its own reputation behind a bid, it takes on a responsibility beyond the simple legal duties. 
    In the case of the Al-Fayeds, the advising bank is Kleinwort Benson, on most measures the largest merchant bank in the City and of the highest reputation.  We looked therefore, in the first instance, to Kleinworts for information to support the bid. 
    The formal offer document to the shareholders of the House of Fraser, due to be published tomorrow, is unlikely to shed any more light on the Egyptians.
    Kleinwort Benson say that "there will be some more information about their resources and their intentions for House of Fraser, but not a great deal."
    Kleinwort has remained tight-lipped despite a steady stream of inquiries about the three brothers since they bought a 29.9 per cent share stake in Fraser from Lonrho for £138 million last November.  Interest in the brothers heightened earlier this month when they took control of Fraser by buying another 21 per cent stake to win control of the group. 
    Alfayed Investment and Trust (AIT), the Liechtenstein controlled company owned by the brothers which now owns Fraser with the blessing of the Department of Trade and Industry, was described as "a private company controlled by Mohamed, Salah and Ali Fayed," in the original Kleinwort press release.  "The Al-Fayed family has widespread international interests including, in particular, ship-owning, luxury hotels, construction, oil, oil services, banking and property," it said. 
    Sir Edward du Cann, chairman of Lonrho (which was investigated twice over House of Fraser) maintains that the Al-Fayeds have been able to win control of the company "without, apparently, more than the most cursory examination of their financial status, their past history, their management capabilities, their intentions in regard to the maintenance of the existing stores, or their plans for the future."
    What exactly are the Al-Fayeds' interests described in general terms in the original press release about them, we asked Kleinwort Benson?  Kleinwort declines to give specific details of the Al-Fayed shipping interests.  But after several conversations with Mr. John MacArthur, the Kleinwort's director handling the Al Fayed affairs, he confirmed that the brothers had no fewer than 40 ships.  These include liners, a tanker, and cargo vessels operating primarily in the Mediterranean. 
    Asked which company runs the shipping operation, Kleinwort points out that in the shipping industry "you have one ship holding company for each ship, for taxation purposes.  If you have got 40 cargo vessels, you will have 40 companies."  But Kleinwort declined to name either the ships, or the companies which operate the Al-Fayed ships.  Further inquiries in shipping circles provide no firm additional evidence about the Al-Fayeds' shipping interests. 
    Inquiries about the Al-Fayeds' "luxury hotels" suggest that, in fact, the brothers only own one hotel, the Paris Ritz.  Kleinwort says that the brothers bought it for $30 million in 1968, from a consortium of investors which included the ship owner, Stavros Niarchos, the widow of Monsieur Ritz, and Cyril Stein of the Ladbroke Group. 
    Since 1968 the brothers have spent a further $70 million on improving the hotel and Kleinwort estimates that it is worth in the region of $200 million to $300 million.  This compares with the estimated £50 million to £60 million recently paid by the Sultan of Brunei for the Dorchester in London.  The Dorchester has 75 more rooms.
    Next we asked about the Al-Fayeds' construction interests.  Kleinwort says that the brothers' biggest interest was a 20 per cent share stake in Costain, the UK contracting group.  The brothers sold it to Lonrho in 1975, bought it back in 1976, and sold it to institutions in 1977 for £15 million.  Today, the brothers have investments in construction companies throughout the world but none, say Kleinwort, are as significant as was the Costain investment.

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