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Parental ties deepen for Pfizer, Glaxo

Mumbai, Sept. 21: Pfizer India and Glaxo SmithKline Pharmaceuticals will mirror their parents more closely after a pair of mergers.

While Pfizer will snap up Parke Davis, Glaxo SmithKline is in the process of integrating Burroughs Welcome.

Both Pfizer and Glaxo have had to endure an agonising wait before they could replicate their global alliances in India. The main obstacles to merger came in the form of a disgruntled lot of shareholders and employees.

The merger of Parke Davis with Pfizer India will create the country’s fourth-largest drug firm with net sales of over Rs 684 crore. Industry watchers say that could be followed by a takeover of Pharmacia Healthcare. Pfizer acquired Pharmacia Corp in a $60-billion deal last year.

On the other hand, the chances of the legal integration of Burroughs Wellcome India with Glaxo Smithkline now appear better than it was a few years back. In both cases, operations of group companies have been integrated, while a legal merger has been delayed.

A possible merger of Burroughs will make Glaxo a Rs 1,328-crore pharmaceutical major with medicines that cover anti-asthma, vitamins, vaccines, cold preparations and the highly profitable cardio-vascular treatments.

Expectations of their merger have swirled since the mid-1990s, when their parents united. However, the process ran into a roadblock in India, where workers at Burroughs’ Mulund unit in Mumbai resisted the move due to wage differences between the two companies.

However, analysts say both companies will fold into one soon. On Thursday, Burroughs informed stock exchanges that it was on course to complete a voluntary retirement scheme for staff at the Mulund unit.

“The company has accepted applications for voluntary retirement from 509 employees and will have to pay a total sum of approximately Rs 64 crore towards their separation cost,” the company said in its letter.

“The merger of Burroughs with Glaxo Smithkline was not happening because workers at the Mulund unit were resisting the move. Now that manufacturing has stopped and workers have accepted the VRS, it is felt that a merger may be possible,” an analyst pointed out.

A Glaxo spokesperson said the company has “not yet initiated” measures for the unification of Burroughs. He refused comment on whether it is imminent.

Earlier this month, Pfizer heaved a sigh of relief as the Supreme Court dismissed a special leave petition filed by dissenting shareholders and approved the merger of both companies.

It had been stalled for over a year as some shareholders opposed the swap ratio, which the boards of both companies had approved in June last year.

To complete the merger process, Pfizer will issue equity shares in the proportion of four of its shares for every nine of Parke Davis.

Pfizer, which will also pay a dividend of Rs 7.50 per share to its shareholders, hold a 40 per cent stake in the merged entity. Pfizer with its superior distribution reach will now be in a position to better market some of the key products of Parke Davis.

Before this, in 2000, the worldwide merger of Pfizer Inc and Warner Lambert (the parent of Parke Davis) resulted in the creation of the largest global pharmaceutical company. Shareholders of both companies had approved the merger proposal in August last year and Bombay High Court had given its clearance in February.

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