Wesfarmers $687 million bid to pick up Priceline-owner Australian Pharmaceutical Industries (API) has been shot down by its board, stating it undervalues the business.

The board said the bid’s timing was “opportunistic”, given the impact Covid-19 has had on its retail division, and that it is well placed to bounce back from any short-term struggles with substantial growth expected in the medium-term due to its place within the health, wellness and beauty sectors.

“[We] will only progress a change of control transaction on terms that recognise the fundamental value of API and are in the best interest of API shareholders as a whole,” the board said.

API said Wesfarmers’ offer, which sat at a premium of 18.7 per cent of the three-month volume weighted average price, was significantly below the market average for transactions of this nature.

Inside Retail has contacted Wesfarmers for clarification on what its next step is, or whether it will increase its offer.

The business’ plan was to buy up API and use it to enter the “growing health, wellbeing and beauty sector.”

“API would form the basis of a new healthcare division of Wesfarmers and a base from which to invest and develop capabilities in the health and wellbeing sector,” Managing Director Rob Scott said.

“The combination of Wesfarmers and API is a compelling opportunity to capitalise on API’s strengths and positioning in these markets while drawing upon Wesfarmers’ capabilities in retail and distribution, our strong balance sheet and our willingness to invest in our business for growth over the long term.”