Temasek agrees to buy stake in beauty retailer A.S.Watson for $5.7 billion

Fri Mar 21, 2014 6:41am EDT
 
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By Denny Thomas and Donny Kwok

HONG KONG (Reuters) - Singapore state investor Temasek Holdings TEM.UL has agreed to buy almost a quarter of health and beauty retailer A.S. Watson for about $5.7 billion in what would be its single biggest investment and one that would boost its exposure to Asia's fast growing consumer sector.

The purchase of 24.9 percent of A.S. Watson, owned by Asia's richest man Li Ka-shing, is part of Temasek's aggressive reshaping of its $170 billion portfolio to ensure higher returns. The state investor's returns have often lagged its own internal metric in recent years as it focused on blue chip stocks.

Retail sector investments are seen as a way to profit from rising consumer spending in emerging Asian markets such as China and Indonesia. A.S. Watson's business includes personal care stores which dominate the beauty and health market in China, a sector forecast to grow by around 40 percent to $186 billion by 2015.

"The consumer retail sector is a good proxy to growing middle income populations and transforming economies," Chia Song Hwee, head of the Temasek's investment group, said in a statement.

"This is very much part of our investment themes as we shape Temasek's portfolio for the long term."

Temasek has 24 consumer-related direct investments, according to Standard & Poor's CapitalIQ database. They include China online education services company TutorGroup, global sourcing firm Li & Fung Ltd (0494.HK: Quote) and Indonesia retail giant PT Matahari Putra Prima TBK LPPF.JK.

Last week, a Temasek-led shareholder group offered $2.1 billion in cash for the shares in commodities trader Olam International Ltd (OLAM.SI: Quote) they don't already own. Reuters previously reported the state investor was seeking to sell a stake in Thai telecoms operator Shin Corp (INTUCH.BK: Quote).

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Hutchison Whampoa Limited Deputy Chairman Victor Li (L-R), Chairman Li Ka-shing and Group Managing Director Canning Fok attend a news conference in Hong Kong March 21, 2014. REUTERS/Bobby Yip