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Temasek reportedly seeking to sell AS Watson stake

Singapore’s Temasek Holdings is reportedly looking to quit its stake in Hong Kong-headquartered beauty products retailer AS Watson.

Temasek spent US$5.6 billion to acquire a 25 per cent share of AS Watson in 2014 from Hong Kong’s CK Hutchison, which retains the majority stake. According to Vinicy Chan and Elffie Chew of Bloomberg News, Temasek made the investment expecting the business to be listed within three years. But softening investor sentiment towards retail sector listings has weakened since that plan was first envisaged. Investors are spooked by the demise of a slew of brick-and-mortar-focused brands across developed markets.

AS Watson has some 14,500 stores in 24 markets around the world, and has market leadership in 15 of those. That could make the business an attractive target for private equity funds, despite the company appearing to be focused more on opening new stores than migrating online, where consumers are buying more beauty and healthcare products.

Bloomberg says in an analysis published online by Deal Street Asia, that a private equity business would be among the more likely buyers for the Temasek stake, given the amount of industry money that’s sitting idle.

“That said, any acquirer will still be in a minority position, even if the entire 25 per cent is sold. Along with the business’s poor growth prospects, the absence of control is likely to be reflected in the valuation. This is one retail sale that will need a discount to be attractive.”

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