Hutchison snaps up Perfume Shop chain for £222m

Hutchison Whampoa, the Hong Kong trading conglomerate controlled by the billionaire Li Ka-Shing, is to buy Merchant Retail, the UK business behind The Perfume Shop.

Hutchison Whampoa, the Hong Kong trading conglomerate controlled by the billionaire Li Ka-Shing, is to buy Merchant Retail, the UK business behind The Perfume Shop.

Hutchison, which owns the "3" mobile phone business, is paying 197p a share for the company, valuing it at £221.9m.

The Hong Kong group is using its AS Watson division to acquire Merchant Retail in a move that will bring it into the same stable as Superdrug, the other UK retail chain controlled by Hutchison.

Merchant Retail is selling out at a time when retail sales in the UK have started to deteriorate as consumers become more cautious. Alongside the news of its offer from Hutchison, Merchant Retail issued its annual results yesterday which contained a stark warning for the outlook for the British high street.

It said: "Trading conditions on the high street since Christmas can certainly be described as challenging and sales this year will be hard won."

It warned that while The Perfume Shop chain had generated a like-for-like sales increase of 3.6 per cent for the first seven weeks of the new financial year, it was under competitive pressure from discount retailers and market entrants with aggressive expansion plans.

"In addition, consumer spending has shown weakness in recent months. These factors have combined to make the board cautious about the medium-term prospects for The Perfume Shop business," Merchant Retail said.

Despite Merchant Retail's bearish outlook, Hutchison is confident it can still expand its latest acquisition.

AS Watson's group managing director, Ian Wade, said: "We look forward to bringing our resources and international experience to grow Merchant Retail's business in the UK."

Merchant Retail has 114 The Perfume Shops in the UK and Ireland and owns the Jersey-based De Gruchy department store. Group sales were 9 per cent higher in the year to 26 March to £193.8m, while profits before tax were 2 per cent up at £16.8m. Its shares closed up 2.5p at 194.5p.