The Hindu Business Line : GSK, Burroughs Wellcome boards clear merger

Mr Deepak Parekh (standing), Chairman, GlaxoSmithKline Pharmaceuticals Ltd, with Mr S. Kalyanasundaram, Managing Director, GSK, and Dr Mark Reilly, Non Executive Director, GSK, at a press conference in Mumbai on Wednesday. - Paul Noronha

Mumbai , March 17

THE long-drawn merger of Burroughs Wellcome India Ltd (BWIL) into GlaxoSmithKline Pharmaceuticals Ltd (GSK) in India was sealed on Wednesday with the boards of both the companies approving the scheme of amalgamation.

The boards have decided on a share swap ratio of 14 GSK shares for every 10 held by BWIL shareholders.

The merger in India comes nine years after GSK's global takeover of Burroughs in 1995. Proceedings in India had been delayed on account of labour-related problems at BWIL's Mulund plant, which currently stand resolved.

Following the merger, the parent company - GSK Plc's - holding in the combined entity would now be 49.2 per cent. However, the merger would not necessarily result in a change in the constitution of the board, company top brass said, in a media briefing after the board-meet. "Burroughs Wellcome is being merged into GSK and for all purposes the GSK board will take decisions for the combined entity," Mr S. Kalyanasundaram, Managing Director of GSK and BWIL, said. The merger is subject to the approval of shareholders of both the companies and the High Court in Mumbai. While the process is expected to be completed this year, the merger when approved will be effective retrospectively from January 1, 2004.

Earlier on Wednesday, Ernst and Young Private Ltd and Deloitte Haskins & Sells made presentations to the two boards to recommend a swap ratio for the merger. "The known liabilities have been taken into account, surplus assets have been valued and this was basically the last leg of simplification," Mr Kalyanasundaram said.

Since the two companies have already been functioning as one entity and with the products and personnel rationalisation being completed, he said, the merger would see minor impact in terms of the services taxes paid by the two companies, for instance.

As for BWIL's Mulund facility, that is currently closed, he said that they would look to dispose the facility, plant and land. But first priority would, however, be to complete the sale of GSK's Worli plant, which is believed to be in the last stage, with details being ironed out by lawyers, company officials said.

Meanwhile, on the surplus cash between the two companies, amounting to Rs 500 crore - he said that the company would look at different options, including buying suitable brands or businesses or a buyback of shares.

The merged entity comprises about 4,200 employees and with merger now complete, it would be back to business as usual for the pharma major, he said.

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