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Hutchison Whampoa Limited


For Immediate Release

A.S. Watson announces £221.9 million recommended cash offer
for shares of UK specialist perfume retailer Merchant Retail

[Hong Kong, 24 May 2005] A.S. Watson, the retail and manufacturing division of Hutchison Whampoa Limited, announced today a recommended cash offer of £221.9 million (the "Offer") for the entire issued and to be issued ordinary share capital of Merchant Retail Group PLC, a UK listed specialist perfume retailer.

Merchant Retail's principal business, The Perfume Shop, has developed a highly successful format in the UK fragrances sector. The business has grown consistently over the past five years, from 55 stores to 114 stores in the UK and Ireland, generating turnover that has increased from £37.8 million to £105.8 million over the period. The preliminary results for the 52-week period ended 26 March 2005, announced today, show another strong performance.

A.S. Watson is the largest health and beauty retailer in the world by number of stores. Since 2000, Europe has been a major focus of expansion for A.S. Watson, where it has actively built a strong European presence in the health and beauty market through a series of acquisition. Merchant Retail represents a strategic opportunity for the growth and development of A.S. Watson's perfumery and cosmetics business. The addition of Merchant Retail to A.S. Watson's European network will complement the recently acquired Marionnaud chain which currently has no presence in the UK

Commenting on the offer, Ian Wade, Group Managing Director of A.S. Watson, said:

"I am particularly proud to announce this Offer as I believe in the strong potential of Merchant Retail. The addition of Merchant Retail to our portfolio further expands our European footprint and strengthens our position as the largest retailer in the perfumery and cosmetics sector of the health and beauty market with more than 1,500 stores. We look forward to bringing our resources and international experience to grow Merchant Retail's business in the UK."

Brian O'Callaghan, Chairman of Merchant Retail Group plc, said:

"Merchant Retail is a natural choice for A.S. Watson to establish a strong presence in fragrances in the UK, to complement its recent acquisition of Marionnaud in France. Merchant Retail has performed well in recent years. However, with the likelihood of an increasingly competitive market in the UK and a challenging retail spending environment, developing the group further is most likely to succeed if undertaken by a larger international corporation. The Directors of Merchant Retail consider the terms of the Offer to be fair and reasonable and accordingly have unanimously recommended that Merchant Retail Shareholders accept the Offer."

Summary of the Offer

About A.S. Watson

A.S. Watson is the largest health and beauty retailer in the world. With a history dating back to 1828, A.S. Watson has evolved into an international retail and manufacturing corporation with operations in 31 markets worldwide.

A wholly-owned subsidiary of Hong Kong-based multinational conglomerate Hutchison Whampoa, A.S. Watson operates a total of 15 retail brands with over 6,200 retail stores spanning from health & beauty chains, perfumeries & cosmetics to its food, electronics and fine wine. It is also an established player in the beverage industry, providing a full range of beverages from bottled water, fruit juices, soft drinks and tea products to some of the world's finest wine labels via its international wine wholesaling and distribution network. At present, A.S. Watson employs over 87,000 people worldwide.

About Merchant Retail Group plc

Merchant Retail Group is a specialty perfumery retailer and department stores group, operating in the UK, Ireland, Australia and Jersey. The Merchant Retail Group has two main businesses, The Perfume Shop, and de Gruchy. During the 52-week period ended 26 March 2005, Merchant Retail Group completed the sale of its third business, Joplings, comprising four department stores in the Midlands and North East of England, for gross proceeds of £26.6 million.

The Perfume Shop has 114 branches located in both shopping centres and malls throughout the UK and Ireland and sells a range of branded fragrances. De Gruchy is the leading department store in Jersey, located in St Helier.

Merchant Retail announced today its preliminary results for the 52-week period ended 26 March 2005. Merchant Retail Group reported turnover of £149.2 million (2004: £135.9 million) and operating profits of £18.3 million (2004: £17.1 million). Merchant Retail Group reported net assets of £72.4 million and net cash balances of £30.1 million at 26 March 2005 (net assets of £58.8 million and net debt of £3.8 million at 27 March 2004).

The above press release and related photo can be found in our corporate website's News section [www.aswatson.com]


Source: Hutchison Whampoa Limited
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