GlaxoSmithKline Pharmaceuticals on Wednesday announced that it would consider merging group company Burroughs Wellcome India with itself.

The merger will create India's fourth largest pharmaceutical company with a combined turnover of over Rs 1,400 crore (Rs 14 billion).

Deepak Parekh, chairman, GlaxoSmithKline, said at the annual general meeting on Wednesday: "The board will meet on March 17 to consider the proposal for the merger and to approve the scheme of amalgamation." The board would also decide the swap ratio and other details at the meeting, he added.

Analysts who track the pharmaceutical industry expect a merger ratio of 5:3 in favour of Burroughs Wellcome, that is, five Glaxo shares for every three shares of Burroughs Wellcome.

Glaxo SmithKline Plc owns a 51 per cent stake in Burroughs Wellcome Plc, while it owns a 49.8 per cent in Glaxo India.

Both Glaxo and Burroughs Wellcome stock prices moved up sharply on news of the proposed merger, despite the bearish trend in the market. The Glaxo scrip gained 3.15 per cent to close at Rs 637.30, while the Burroughs stock moved up 12.99 per cent to Rs 856.95.

The merger of Burroughs Wellcome India with Glaxo comes nine years after the merger of Glaxo Plc and Wellcome Plc, their global parents. In India, the merger has been on hold because of resistance from the latter's employee unions, over issues of disparities in the pay scales of the two firms.

However, with the employee separation scheme offered by Burroughs Wellcome, the remaining 400-plus employees agreed to the merger scheme.

Glaxo posted a net profit of Rs 172.22 crore (Rs 1.72 billion) for the accounting year ended December 31, 2003, marking a 75.64 per cent increase over the previous year, on net sales of Rs 1,191 crore (Rs 11.91 billion).

But Burroughs Wellcome dropped into the red with a net loss of Rs 5.8 crore (Rs 58 million) in the year ended December 31, 2003 against a net profit of Rs 35.10 crore (Rs 351 million) in the previous year. Its sales rose 10 per cent to Rs 198 crore (Rs 1,980 million).

At the Glaxo AGM, Parekh said it would take between 7 and 9 months for the merger to be effective. "We hope to complete the merger process by the end of this year," he said.

While Glaxo recorded sales of Rs 237 crore (Rs 2,370 million) in January and February this year, a rise of 13.9 per cent over the sales in the corresponding period of the previous year, Burroughs Wellcome India registered a turnover of Rs 42 crore (Rs 420 million) in the first two months of the current year, compared with Rs 33 crore (Rs 330 million) in the corresponding period of the previous year.