Woolworths has withdrawn its bid for Australian Pharmaceutical Industries (API), leaving Wesfarmers as the only suitor for the Priceline Pharmacy owner.
Woolworths has examined the financial accounts of API but on Friday said it could not ensure the financial returns would meet those required by its capital allocation framework.
The retail giant in December pitched an $872 million takeover offer, which would have paid $1.75 per share.
The decision is sure to delight many pharmacy operators, who were concerned the proposal threatened community pharmacies in regional areas.
Wesfarmers management and investors will also be pleased. Woolworths had made a superior offer to Wesfarmers’ bid of $1.55 per share.
The owner of Bunnings and Officeworks, which owns almost 20 per cent of API, is progressing talks to buy all shares.
The boss of Wesfarmers, Rob Scott, has previously said API would form the basis of a Wesfarmers healthcare division.
He said there were opportunities to expand the product range, improve online shopping and the supply chain.
API also owns the Pharmacist Advice, Priceline Pharmacy and Soul Pattinson Chemist outlets.
API shares on the ASX were lower by 21.25 per cent to $1.51 at 1109 AEDT.
Woolworths shares were higher by 0.32 per cent to $37.55.
Wesfarmers shares were up 1.5 per cent to $58.95.