Temasek pays $5.7b for stake in Li Ka-Shing’s A.S. Watson

It is expected to be Singapore government-owned Temasek's single largest investment and represents a significant bet on the growth potential of the consumer sector in Asia.

The transaction values A.S. Watson at approximately HK$177 billion, or HK$41.50 per share for shareholders in Hutchison Whampoa (HWL). About 70% of the net proceeds will be distributed via a special dividend of HK$7 per share. HWL will continue to hold 75.05% of the company.

A.S. Watson operates more than 10,500 retail stores worldwide and generated a net profit of around HK$7.8 billion in 2013.

Watsons, the largest international health and beauty retailer in Asia and Europe, is the company's flagship brand, with over 4,000 outlets and more than 900 pharmacies. It is present in nine Asian markets, including a dominant position in China where the sector is forecast to expand by 40% to $186 billion by 2015.

Other health and beauty assets include UK-based Superdrug and Netherlands market leader Kruidvat.

A.S. Watson is also active in food and fine wines and consumer electronics retailing, as well as beverage distribution in Hong Kong and China. The company owns Hong Kong supermarket chain ParknShop, which it put on the market last year - reportedly attracting several private equity bids - only to pull the sale after valuations failed to meet expectations.

An IPO of the entire A.S. Watson business was slated for 2014 but the Hang Seng Index has performed poorly so far this year, prompting two other offerings to be withdrawn in March. HWL and Temasek have agreed to work together towards listing the company "at a suitable time," according to a statement.

Temasek said the investment allowed it to increase exposure to the consumer retail sector, with a balanced focus on a growing Asia and a recovering Europe.

"A.S. Watson is a well-established company with a proven management team, a valuable franchise and a good growth story," said Song Hwee Chia, head of Temasek's investment group. "The consumer retail sector is a good proxy to growing middle income populations and transforming economies. This is very much part of our investment themes as we shape Temasek's portfolio for the long term."

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• Topics
• Greater China
• Southeast Asia
• Consumer
• Expansion
• Temasek Holdings
• Consumer
• China
• Singapore
• Growth capital
• Hong Kong (China)