<strong>China: Shanghai Tobacco Plans to Sell Stake in Watsons</strong>

Source from:  WantChinaTimes&#8206; 04/16/2014

The Shanghai Tobacco Group plans to sell its 20% stake in health and beauty chain Watsons in Shanghai for 748.7 billion yuan (US$120.5 billion), with the company set to completely withdraw from Watsons after the deal is settled according to the Shanghai United Assets and Equity Exchange, cited by the Shanghai-based China Business News.

Li Ka-shing's Hutchison Whampoa, which is a major operator of Watsons, could possibly buy Shanghai Tobacco's 20% stake.

According to the exchange, Hutchison Whampoa subsidiary JCDecaux (Hong Kong) owns an 80% stake in Shanghai Watsons, while Shanghai Tobacco owns the remainder.

Shanghai Watsons reported an operational income of 1.3 billion yuan (US$209 million) in 2012, with its net revenue touching 701.5 billion yuan (US$112.7 billion), which was a decline, compared with a year ago.

The company reported operational income of 1.2 billion yuan (US$193 million) between January and November 2013, with net revenue of 559.2 billion yuan (US$89.9 billion).

Watsons was acquired by Li's Hutchison Whampoa in 1981. Shanghai Tobacco originally owned a 40% stake in Shanghai Watsons, while JCDecaux owned 60%. In 2008, Shanghai Tobacco sold its 20% stake for 360 billion yuan (US$57.8 billion) and JCDecaux bought the stake, according to the paper.

Shanghai Tobacco's sale of its stake was reportedly aimed at speeding up the sole proprietorship of Hong Kong funds.

Based on previous regulations, capital from Hong Kong, Macau and Taiwan is required to set up a joint venture with a local firm, however, with market liberalization and a change in policies, the Hong Kong firm intends to become the sole owner of Watsons.

Watsons did not comment on the matter but said that it had over 1,700 outlets and 30 million members across more than 300 cities on mainland China. It also plans to open an additional 1,300 stores on mainland China by 2016 and boost its store count to 3,000.

It also launched an e-commerce store in 2013 with the aim of expanding its market to more Chinese cities that do not have bricks-and-mortar stores. Enditem