(Corrects Costa title in paragraph seven)

LONDON - The investment vehicle of Qatar's royal family has bought famous London department store Harrods from Egyptian-born businessman Mohamed al-Fayed in a deal reported to be worth around 1.5 billion pounds ($2.3 billion).

Qatar Holding, the prime vehicle for strategic and direct investments by the State of Qatar, would not confirm the estimated figure reported by Sky News.

The country's prime minister, who is also chairman of Qatar Holding, said there were plans to upgrade the luxury store, popular with tourists and an historic landmark in the upmarket Knightsbridge area of London.

What I can assure you is Qatar Holding will do their best to upgrade this monument, to make it even greater and better for the tourism and also for the British people, Sheikh Hamad bin Jassim al-Thani told reporters in an impromptu news conference at the store.

He said it will create a road map to upgrade Harrods in the next few months.

The deal brings to an end 25 years of ownership by al-Fayed, who will become honorary chairman.

A COLOURFUL FIGURE

Mohamed al-Fayed has decided to retire and to spend more time with his children and grand-children, Ken Costa, chairman of Lazard International, said in a statement on Saturday. Lazard advised the al-Fayed family trust.

Qatar Holding was specifically chosen by the Trust as they had both the vision and financial capacity to support the long term successful growth of Harrods, Costa added.

Qatar Holding is an arm of Qatar Investment Authority (QIA), which was founded by the State of Qatar in 2005 to strengthen its economy by diversifying into new asset classes.

QIA is one of the largest sovereign wealth funds in the world with an estimated $60 billion or more in assets under management.

Qatar Holding has stakes in supermarket chain J Sainsbury (SBRY.L), the London Stock Exchange (LSE.L) and Credit Suisse.

Purchase of the unique company followed interest by the Emir of Qatar, the prime minister said.

Harrods generates good and stable returns as a business, it will add much value to our international portfolio of investments, Al-Thani said in a statement.

Credit Suisse advised Qatar Holding.

Al-Fayed, who also owns English soccer club Fulham, bought Harrods in 1985 for about 615 million pounds at a time when the group also owned the House of Fraser department store chain, which was later spun off.

A colorful figure, al-Fayed waged a long campaign claiming his son Dodi and Princess Diana, who died together in a Paris car crash in 1997, were murdered in a conspiracy.

Qatar Holding will be the fifth owner of Harrods since its creation in 1840.

(Reporting by Mark Potter; editing by Jon Boyle)

Egypt