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Pharmacy and beauty group Alliance Boots (AB) has turned down a £9.7 billion takeover bid.

The bid, made by private equity firm KKR, valued the group at £10 per share but was dismissed after the board met earlier today to consider its options.

Italian businessman Stefano Pessina was excluded from the meeting, despite holding a 15 per cent stake in AB, because of his position backing the KKR bid.

"Having reviewed the KKR proposal in detail with its advisers, the board of Alliance Boots does not believe it reflects the fundamental value of the company or the attractive prospects, opportunities and synergies available to Alliance Boots following the very recent completion of its merger," this afternoon's statement said.

"As a result, the board of Alliance Boots has today informed KKR and Stefano Pessina that the KKR proposal cannot be recommended to the shareholders of Alliance Boots.

Business commentators have suggested that the "friendly" approach from KKR will have to be increased to a more competitive offer if it is to meet with success.

Despite the "preliminary and highly condition" nature of the bid, shares in AB rose by seven per cent during the first two hours of trading this morning.

Since then the group's share value has increased by another percentage point, rising to nearly eight per cent of its starting price.

AB revealed a three per cent rise in its half-year profits last November, having been formed on July 31st 2006.

Boots' merger with pharmaceutical distribution company Alliance Unichem was motivated by a belief that annual cost savings of £100 million could be achieved after four years of operations.