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Sandy Li

Hutchison Whampoa's retail arm, AS Watson (ASW), will become the world's third-largest pharmacy chain by outlets following its 1.3 billion euro (about HK$9.94 billion) acquisition of Netherlands-based Kruidvat group.

The cash purchase, which could be completed as early as October, is ASW's biggest acquisition.

The addition of Kruidvat, with 1,900 health and beauty stores across Europe, will triple ASW's pharmacy count to 2,860 from 960 and expand its worldwide presence from 17 to 20 countries.

Counting the 320 new stores Kruidvat plans to open this year and next, the total will rise to more than 3,100.

ASW group managing director Ian Wade said the proposed acquisition of the 74-year-old privately run retail chain would help to balance Hutchison Whampoa's portfolio.

The deal would enable Hutchison to achieve a better balance in its business mix as the contribution from retail had been relatively small.

Mr Wade expected ASW's revenue from the pharmacy business would increase to 75 per cent from 25 per cent of the total after the acquisition.

The Kruidvat group's revenue would increase to more than eight billion euros next year from this year's seven billion euros.

The companies being acquired include health-and-beauty retail chains Superdrug in Britain, Kruidvat and Trekpleister in the Netherlands, Kruidvat in Belgium and Kruidvat's 50 per cent-owned Rossmann in Poland, Hungary and the Czech Republic; and perfumery retail chain ICI Paris in the Netherlands and Belgium.

Mr Wade said negotiations with Kruidvat group chief executive Dick van Hedel had lasted nine months and the agreed price was significantly lower than the original asking price.

The price represented a price-earnings ratio of below 10.

Hutchison Whampoa group managing director Canning Fok Kin-ning said the acquisition also gave the company a unique opportunity to offer more points of sale for its 3G business in Britain.

'They have over 1,000 stores in the UK, which means we will have 1,000 points of distribution, all managed by ourselves,' Mr Fok said.

'The store-within-a-store concept will be our main distribution method for 3G. It's expensive to completely use our own stores for 3G. We'd go broke trying.

'We will probably have about 10 flagship stores for the operation, but not any more. We have begun talking with potential partners - such as Harvey Nichols,' he said.

Mr van Hedel said the acquisition was 'a rarity in today's business world'.

'The experience and global strength of Hutchison Whampoa will help us achieve new heights,' he said.

Daiwa Institute of Research (HK) equity research director Jonas Kan said: 'The deal is positive based on the financial figures presented by the group at the moment.'

Mr Kan expected profit from Hutchison's retail division would nearly double to HK$1 billion from about HK$600 million last year.

Mr Wade said the acquisition would still need about two to three months for due diligence and to obtain approval from European Union regulatory authorities.



Takeover makes Watson's world No 3