Saudi Arabia has struck a deal to become the junior partner in the iconic London department store Selfridges after buying out a bust Austrian property tycoon.

In a tie-up with Thailand’s Central Group, a family-owned retail conglomerate, Saudi’s Public Investment Fund (PIF) has acquired a 40pc stake in Selfridges from Rene Benko’s property business Signa.

Under the terms of the deal, Central will have a 60pc stake in both the property and operating businesses of Selfridges, while PIF will significantly increase its 10pc position.

It means Central will strengthen its grip on the retailer, ending months of uncertainty over Selfridges after a fraud investigation was launched into Mr Benko earlier this year. Mr Benko has denied any wrongdoing.

Mr Benko’s Signa empire collapsed in late 2023, raising questions over the future of the 50pc stake that it bought in Selfridges two years prior.

The Telegraph previously revealed that PIF had been a private financial backer to Signa as part of the Selfridges deal, with its involvement seen as an example of Saudi Arabia’s use of intermediaries to deploy its wealth and boost its international clout.

More recently, documents suggested that Signa had syndicated part of its stake in the business to PIF, which has held its 10pc stake in Selfridges since the summer.

It had previously been suggested that PIF, which is still owed money by Signa, had been looking to boost its stake in the business to 50pc.

However, the latest update suggests PIF has now agreed to become the junior partner in Selfridges.

As well as owning Selfridges in the UK, PIF also controls Newcastle United and boasts stakes in Sir Rocco Forte’s luxury hotels group and Heathrow Airport.

PIF accounted for just over a quarter of the $123.8bn (£97.2bn) spent by all of the world’s sovereign wealth funds last year, as Saudi Arabia seeks to diversify its economy away from oil.

Central Group’s executive chairman Ros Chirathivat said on Monday that PIF was its “partner of choice in this distinguished company, and we are confident that PIF’s proven global track record of investments combined with our luxury retail industry expertise, brand management skills and innovative approach, will allow Selfridges Group to continue to flourish for the benefit of all its stakeholders”.

Central said the deal included new investment from both parties that would “strengthen Selfridges Group’s financial position and support the group’s future development”.

It is believed that this primarily relates to reducing debt levels across Selfridges’ property portfolio.

Accounts for Selfridges Retail Limited, which covers the business’s UK stores, its website and its mobile app, show the company lost £38m for the 12 months to January 2023.

The loss came despite sales jumping almost 30pc to £843m, nearing their pre-pandemic level of £853m.

Turqi Al-Nowaiser, deputy governor and head of international investments division at PIF, said: “We are pleased to be partnering with Central Group in Selfridges Group, one of Europe’s most iconic luxury department stores. This transaction allows Selfridges Group to build on its position as a premier retail destination.”

A Selfridges spokesman added: “We welcome PIF as our investor alongside majority shareholder Central Group. Selfridges Group is delighted to have their joint support, ensuring that Selfridges Group continues to thrive as a collection of world-leading omnichannel department stores.”

The change of ownership comes eight months after Mr Benko filed for personal insolvency following the implosion of Signa.

After founding Signa in 1999, Mr Benko was ousted by the company’s shareholders last November after restructuring experts were brought in to oversee the business.

In addition to a shareholding in Selfridges, his company had built up stakes in New York’s Chrysler Building and Berlin’s KaDeWe luxury department store.

However, Central seized majority control of Selfridges’ operating company in November by converting a €364m (£317m) loan into equity.

Before Signa collapsed, Mr Benko was thought to be one of Austria’s richest people. He reportedly joked that only the property portfolios of the Catholic church and the British Royal family could match that of Signa.