Photo/Lan Suying (NBD)

Mar. 21 (NBD) -- A consortium including Chinese internet giant Tencent Holdings Ltd. is weighing bids for part of Temasek Holdings Pte's stake in A.S. Watson Group, a retail division of CK Hutchison Holdings Limited, Bloomberg reported on Wednesday citing people with knowledge of the matter.

When reached by NBD, CK Hutchison refused to comment on market speculation. 

According to the above-mentioned people, Temasek is considering selling around a 10 percent stake in A.S. Watson for about 3 billion U.S. dollars. The Singaporean state investment company bought a 25 percent stake in the retailer for 44 billion HK dollars (5.6 billion U.S. dollars) in 2014.

The holding has also drawn interest from Alibaba Group Holding Ltd.

Established in Hong Kong in 1841, A.S. Watson is now the world's largest health and beauty retailer. Every year, over 5.2 billion customers and members shopped with the company's 12 retail brands in stores and online. 

As of the end of June 2018, the Hong Kong-based company has had more than 14,400 stores in 24 markets. In China alone, it owns over 3,600 physical stores and has over 65 million members. 

The company's broad distribution network and enormous member base are believed to hold great appeal for Alibaba. 

Kulvinder Birring, CEO of A.S. Watson China, once said around 80 percent of the company's sales was contributed by its members. Moreover, A.S. Watson has the sold agency for many foreign brands and merchandises. 

As many know, Alibaba has been ramping up efforts to enhance cooperation with brick-and-mortar retailers to expand its footprint in the retail field.

One supplier asking not to be named said if A.S. Watson joined the Alibaba system, some of its stores could be able to extend their reach through the tech behemoth's platform. For example, after entering into a supply agreement with Alibaba in October 2018, Sun Art Retail Group's supermarket chain RT-Mart now can reach customers more quickly through the e-commerce titan's instant delivery unit Taoxianda. 

For Tencent, what it really values in the possible A.S. Watson stake is the retailer's investment worth as a quality asset. 

Despite an extensive network, A.S. Watson experienced a slowdown in growth in China in recent years amid the rapid development of cosmetics store chains like Sephora. 

Data showed the health and beauty retailer always maintained a double-digit growth rate in China before 2015, but in 2016 the company registered its first ever negative growth rate in operating revenue in the oriental country. 

To revive slowing sales, A.S. Watson has taken a series of measures, including an attempt in the new retail sector with the introduction of an app designed to answer beauty-related questions. These efforts helped the retailer narrow its same-store sales drop to 1.4 percent in the first half of 2018.

Email: lansuying@nbd.com.cn