By David Winning

SYDNEY--A takeover tussle has begun for Australian Pharmaceutical Industries Ltd. after Sigma Healthcare Ltd. made a proposal worth 773.5 million Australian dollars (US$562 million) to buy the drug retailer and wholesaler.

Sigma is offering A$0.35 in cash and 2.05 of its own stock for each API share, implying a value of A$1.57 per share. The cash component will fall by up to 5 cents, API said, if it declares any fully franked dividends in future.

Sigma is competing with Wesfarmers to acquire API, which owns the Priceline retail chain of pharmacies. Wesfarmers recently offered A$1.55 a share in cash, which API said on Sept. 15 that it intends to recommend shareholders accept.

However, API on Monday said the Sigma proposal looks more favorable than the Wesfarmers offer even though it would take longer to implement.

"On this basis, the board believes it is in the interests of API's shareholders to progress the Sigma indicative proposal and allow Sigma to undertake confirmatory due diligence to facilitate a binding offer in parallel with the confirmatory due diligence being offered to Wesfarmers," API said.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

09-26-21 1933ET