Pfizer’s bid to merge subsidiaries likely to face FIPB opposition

US drug major Pfizer’s proposal for merging its Indian arm with the subsidiary of Wyeth Inc, the company it acquired five years ago, is unlikely to get the Foreign Investment Promotion Board’s approval at its meeting this week.

The Department of Industrial Policy & Promotion is not ready to give the proposed merger the green signal before the company gets the approval of the Bombay High Court.

Court signal “The FDI policy clearly states that the FIPB can approve a merger after the designated High Court gives its nod. In this case, Pfizer has not got its proposal approved from the Mumbai High Court,” a DIPP official told Business Line .

The FIPB, which is chaired by the Secretary of Department of Economic Affairs, and has Secretaries from other Ministries and Departments like Commerce, Industry and Home, as its members, will take up 32 proposals in its meeting on Wednesday.

Other proposals to be taken up include ones made by US telecom company AT&T, World Disney, BNP Paribas and Bulgari International Corporation.

Not on agenda The proposal made by Russian company Sistema JSFC controlled telecom operator Sistema Shyam to increase foreign stake in the firm beyond 74 per cent is not on the agenda of the FIPB as it has been rejected both by the Telecom Department and the DIPP.

While the DoT has rejected the proposal on the ground that the matter qualifies as External Commercial Borrowing and not FDI, the DIPP is of the view that the proposal is premature as the proposed plans span over a period of 10 years.

AT&T’s proposal The DIPP is ready to give a go-ahead to AT&T’s proposal to increase equity from 74 per cent to 100 per cent, despite DoT’s suggestion that it may be allowed to increase it to 98.63 per cent because of existing gaps in its applications.

“We think the issue raised by DoT is not major at all, and AT&T can be allowed to raise its equity to 100 per cent,” the official said.

World Disney’s proposal to invest ₹1,100 crore in its existing venture in India is also likely to be get smooth approval.

Global merger If drug company Pfizer’s proposal is rejected, it will have to approach the FIPB again after it gets the merger cleared by the Mumbai High Court. Pfizer acquired Wyeth in a $68-billion deal in 2009.

The global merger of these two companies was completed by the end of 2009, except in certain countries including India.