Watsons sells 25% stake to Singapore’s Temasek

June 12, 2014 Leave a comment

Watsons sells 25% stake to Singapore’s Temasek

Staff Reporter

2014-06-04

Hong Kong business tycoon Li Ka-shing has sold a nearly 25% stake in Hutchison Whampoa’s personal care store chain Watsons to Temasek Holdings of Singapore for HK$44 billion (US$5.5 billion) after speculation arose that the retailer was planning to go public this year.

The Watsons deal for a 24.95% stake was equivalent to the current market valuation of HK$176.4 billion (US$22.8 billion), which was lower than the market expectation, however the Watsons spinoff may result in a higher-value public listing.

In July 2013, Hutchison Whampoa had said in a statement that it planned to sell its supermarket chain ParknShop, which the market thought would help improve the valuation of Watsons in the listings market as ParknShop’s sales performance was on the decline.

The tender for ParknShop received eight bidders, with Woolworths offering the highest bid at US$2.8 billion compared with other bidders, but the figure was considered a lot lower than Hutchison Whampoa’s expectation of US$4 billion, according to market analysts.

Hutchison Whampoa announced on Oct. 29 last year that it would not rule out the possibility of scrapping a portion of its businesses for public listing, which caused the market to begin speculating that Watsons was seeking to list independently.

Li also said in February this year that he planned to file for a dual listing in Hong Kong and London.

In early March, the market was abuzz that Watsons was set to to file for a public listing at the end of March.

Hutchison Whampoa announced on March 21 that it had entered a strategic alliance with Temasek, however, and had signed an agreement on the same day to sell a 24.95% stake in Watsons to the Singaporean sovereign wealth fund.

Li also said that his company had initiated negotiations with Temasek and it was no easy task to hammer out a large deal within such a short period of time.

The investment of HK$44 billion (US$5.7 billion) is the largest single investment that Temasek has ever made abroad.

Li also changed his stance by saying that he was considering filing for a public listing in Hong Kong and Singapore and might rule out doing so on the London exchange. He also stated that Watsons was scheduled to go public during the next two to three years, rather than this year.

Li was able to strike a deal with Temasek within such a short period of time because the two sides have maintained a good partnership for a long time.

Chia Song Hwee (Xie Songhui), vice president of the investment division at Temasek, said that both his company and Hutchison Whampoa have the same operating philosophy for long-term investment and business expansion.

Chia also expressed optimism about the potential of Asia, particularly China.

The deal is expected to boost stock prices of Hutchison Whampoa and will be favorable for Watsons’ public listing in the future.

 

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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