MUMBAI, Nov 23: Glaxo India is understood to be examining the option of retaining Burroughs Wellcome India Ltd (BWIL) as a separate manufacturing entity following unresolved wage disparities between workers of the two companies. Though both companies have been integrated on several key operational fronts, an official merger in India has yet to be announced.

While a wage accord is understood to have been signed with Glaxo workers, most of those at Burroughs Wellcome are yet to agree on the revised salary package offered by the management. An individual worker has also moved court on related issues, sources said.

Industry sources said that Glaxo India may now be forced to consider transferring some Burroughs Wellcome brands to itself while using the latter as a manufacturing outfit. The main Burroughs Wellcome brands include Septran and Neosporin, both antibiotics and, Actified and Actified Plus, both cold preparations.

Glaxo is a leading player in the vitamins, anti-ulcer and cough and cold market while Burroughs Wellcome's portfolio includes antibiotics, antivirals and antipyretics. Both companies, market sources say, are already working towards cooperation on the marketing front. The combined field strength is about 1,200-strong.

However, Glaxo India officials, when contacted merely said: "As a policy we do not comment on issues related to mergers and acquisitions." Early last week, Glaxo and Burroughs Wellcome managing director, HR Khusrokhan, told The Financial Express that both companies "were in no hurry to merge".

Sources indicated that if Glaxo decides against a merger, shareholders of Burroughs Wellcome could even be compensated for the proposed brand transfers with shares in Glaxo India even as they continue to retain their equity in Burroughs Wellcome. No specific comment was, however, forthcoming from Glaxo officials on this issue.

Sources said that integration on the worker front had been complicated by the fact that wage agreements between the two companies were substantially different. Burroughs Wellcome workers were entitled to unrestricted dearness allowances in line with the price index unlike Glaxo employees.

Burroughs Wellcome workers had been offered a one-time lumpsum payment with a subsequent reduction in salary to align their wages with those of Glaxo employees. Sources added that Burroughs Wellcome employees were also upset about indications of a possible discontinuation of the superannuation scheme.Meanwhile, Glaxo India has entered into a co-marketing arrangement with Abbott Laboratories for clarithromycin, indicated for the treatment of upper and lower respiratory tract infections and skin and soft tissue infections.Glaxo already has similar alliances with three other players -- namely, SmithKline Beecham, UCB and Zeneca -- as part of the company's strategy to source research products of other global players for marketing to enhance growth.

Glaxo's partners aim to cash in on the company's marketing strength and sales reach. Glaxo has a field strength of about 884 and about 25 C&F agents. While Abbott markets its clarithromycin brand as Claribid, Glaxo's brand is called Celex.

INSIGHT: difficult manoeuvre Wage disparities between Glaxo and Burroughs Wellcome have for long been the main roadblock to merging the two companies in India. As there has been a deadlock in negotiations between workers and management, a solution is perhaps being examined to circumvent the problem. One such solution lies in keeping the two entities separate even while bringing the brands under one umbrella.

It is not clear how the shareholders of Burroughs Wellcome will be compensated for the brands transferred -- if that is decided upon. Any issue of fresh Glaxo shares will dilute the parent company Glaxo Wellcome's stake below 51 per cent. The compensation, might, therefore have to be in cash. This will reduce Burroughs Wellcome to a pure manufacturing company. Such companies generally get a low discounting compared to marketing and brand-driven ones. The rump Burroughs Wellcome will, therefore, hold little interest for investors.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.