API, which owns the Priceline chain of pharmacies, quietly lobbed a $727 million bid for Sigma back in October, though it was not announced publicly until December, when API upped its shareholding in Sigma to 13 per cent.
Sigma Healthcare (SIP) shares slumped 15% at one stage yesterday after rejected a half-hearted takeover offer from rival Australian Pharmaceutical Industries (API).
"The Board is confident that after thoroughly assessing the outlook of Sigma on a standalone basis, the current API proposal does not reflect the long-term prospects and value inherent in Sigma having regard to the reset cost base of the business and our own growth agenda", said Sigma chairman Brian Jamieson.
Yesterday Sigma justified its rejection, saying the offer is not in the best interest of shareholders.
Sigma chairman Brian Jamieson said he and the board had formed the view the merger was not in the best interests of shareholders.
"It is clear that API's non-binding indicative offer to pursue a merger of API and Sigma is unable to be taken forward", API said.
The deal was worth $726 million at the time but the fall in the API's share price means the deal, which is to be financed with cash and API shares, is now worth less than $700 million.
Sigma has since completed and validated a major business transformation review identifying more than $100 million in cost efficiencies, which Sigma is capable of delivering as a standalone business over the next 18 to 24 months, it says.
In January, the two companies began a "limited form of due diligence", which included mutual sharing of high-level information.
Mr Hooper pointed to Sigma's soon-to-be debt-free balance sheet, with the $300 million of working capital freed up from the Chemist Warehouse contract to be directed to growth opportunities, including aquisitions, creating more value for suffering investors.
The cost savings will enable underlying earnings to rebound to 2019 levels by the 2023 financial year, according to Sigma.