For Immediate Release

[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

• A.S. Watson's offer is 197 pence in cash for each Merchant Retail Share, valuing the entire issued and to be issued ordinary share capital of Merchant Retail at approximately £221.9 million. The Offer will also include a Loan Note Alternative for shareholders outside the United States, Australia, Canada or Japan.

• The Offer represents a premium of approximately 27 per cent over the average closing price of 155 pence for each Merchant Retail Share for the period from 21 May 2004 to 20 May 2005, a premium of approximately 24 per cent. over the average closing price of 159 pence for each Merchant Retail Share for the period from 21 February to 20 May 2005 and a premium of 16 per cent over the closing price of 170 pence for each Merchant Retail Share on 20 May 2005, the last business day prior to the announcement that advanced talks with a third party were being held.

• The Offeror has received irrevocable undertakings and letters of intent to accept the offer in respect of a total of 41,439,559 Merchant Retail Shares, representing approximately 37.5 per cent of Merchant Retail's issued share capital.

• The Merchant Retail Directors consider that the terms of the Offer are fair and reasonable. The Merchant Retail Directors have unanimously recommended that Merchant Retail Shareholders accept the Offer.

• The Merchant Retail Directors have provided irrevocable undertakings to accept the Offer (or to procure its acceptance) in respect of their own beneficial shareholdings in Merchant Retail.

• The Offer is subject to certain conditions, including confirmation from the UK Office of Fair Trading that it will not refer the transaction to the UK Competition Commission; and valid acceptances of the Offer being received of not less than 90% of the Merchant Retail Shares.

• In its preliminary results for the 52-week period ended 26 March 2005, announced today, Merchant Retail Group reported turnover of £149.2 million, profit before tax (excluding exceptionals) of £18.1 million and basic earnings per share of 11.94p. The Perfume Shop, Merchant Retail Group's principal business, reported like-for-like growth in turnover of 6 per cent.

• The Merchant Retail Group Board has proposed a final dividend of 4.0 pence per Merchant Retail Group Share for the 52-week period ended 26 March 2005. Under the terms of the Offer, an amount equal to this final dividend is included in A.S. Watson's Offer Price and hence will not be declared or paid to Merchant Retail Group Shareholders if the Offer becomes or is declared wholly unconditional.

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]