Hong Kong turmoil, Brexit said to derail Temasek's $4b Watson sale

Founded in Hong Kong in 1841, A S Watson runs more than 15,200 stores in 25 markets, including the Watsons chain of healthcare and beauty shops across Asia, Kruidvat drugstores in the Netherlands and Rossmann pharmacies in Germany.
Founded in Hong Kong in 1841, A S Watson runs more than 15,200 stores in 25 markets, including the Watsons chain of healthcare and beauty shops across Asia, Kruidvat drugstores in the Netherlands and Rossmann pharmacies in Germany.PHOTO: WATSONS

HONG KONG (BLOOMBERG) - Temasek Holdings' sale of a US$3 billion (S$4.17 billion) stake in retailer A S Watson Group has been derailed under the twin pressures of Brexit and the anti-government protests rocking Hong Kong, people with knowledge of the matter said.

The Singapore state investment company put the process on hold after failing to reach agreement on valuation with potential buyers, said the people, who asked not to be identified as the discussions are private. In addition to the turmoil in A S Watson's home market of Hong Kong, uncertainties around Brexit have affected the retailer's business in Britain, where it runs the Superdrug chain, one of the people said.

Temasek, which owns a 25 per cent stake of A S Watson, was considering selling about 10 per cent of the retailer after receiving preliminary interest, Bloomberg News reported earlier this year. Abu Dhabi's sovereign wealth fund and Chinese Internet giants Tencent Holdings and Alibaba Group Holding were among parties that had shown interest in the stake, people familiar with the matter have said.

"As per our company policy, we do not comment on market speculation and rumors," Temasek said in an e-mailed statement.

The Singapore investment firm bought the stake in A S Watson, which is a unit of Hong Kong tycoon Victor Li's CK Hutchison Holdings, for HK$44 billion (S$7.79 billion) in 2014.

Founded in Hong Kong in 1841, A S Watson runs more than 15,200 stores in 25 markets, including Kruidvat drugstores in the Netherlands and Rossmann pharmacies in Germany, according to its website. It also runs the Watsons chain of healthcare and beauty shops across Asia, as well as groceries shops, electronics shops and wine stores in Hong Kong.

Of its 140,000 employees worldwide, 12,900 are based in the former British colony.

Temasek will keep looking into ways to improve the retailer's valuation, one of the people said. It could still resume the sale process in the future, the people said.

Shares of CK Hutchison rose 2 per cent in early Wednesday (Sept 4) trading, while the benchmark Hang Seng Index climbed 1.3 per cent.