AS Watson, the international health and beauty retailer that owns Superdrug in the UK, is the bidder. Watson is owned by Hong Kong trading house Hutchison Whampoa.
AS Watson group managing director Ian Wade said: 'I believe in the strong potential of Merchant Retail. The addition of Merchant to our portfolio 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.'
Merchant chairman Brian O'Callaghan said: '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.'
Evolution analyst Nick Bubb said: 'With management gloomy about prospects for Perfume Shop in the UK and 37 per cent of irrevocables received from major holders, the bid will go through.'
News of the offer emerged last night, just hours before Merchant announced its seventh consecutive year of profit growth. Preliminary profit before tax edged up 2 per cent to£16.8 million on sales 9 per cent up at£193.8 million.
At The Perfume Shop - the focus of Merchant's operations, following its exit from mainland UK department stores - profit increased by 11 per cent to£16.3 million on sales of£124.4 million. Like-for-likes were up 6 per cent.
The retailer expanded overseas, with the opening of two shops in Sydney, Australia, and five more are scheduled before Christmas.
Despite 'challenging' trading conditions on the UK high street, The Perfume Shop's comparable sales rose 3.6 per cent in the first seven weeks of this financial year.