IBA Health is a step closer today to closing the deal on its proposed takeover of beleaguered software supplier iSoft, with IT behemoth CSC providing written consent for the deal to go ahead.
Despite securing a key role with CSC in the NHS's National Programme for IT (NPfIT) in 2005, iSoft's fortunes took a turn for the worse in 2006, when a series of accounting discrepancies lead to an investigation from the Financial Services Authority. This in turn led to revenue revisions and a massive shareholder exodus which left lenders and contract partner CSC redrawing contracts.
The company's share price was reduced from over £4 in December 2005 to just 54 pence in June 2006 and, seeing a fire sale might be on the cards, CSC moved to reserve the right to veto any future sale of iSoft on the basis that such a deal might affect the ability of the former to deliver on the NPfIT contract.
CSC's approval of the takeover offer follows a redrafting of the joint arrangement for the delivery of the NPfIT project, including the integration of CSC and iSoft teams, a renegotiation of payment terms, and a slight reduction in iSoft's contractual responsibilities after 2010.
Having already received unanimous support from the iSoft board, the IBA Health offer will now go to a shareholder vote on 6 July, as local company representatives talk up the offer.
"We're very positive when it comes to the shareholder vote," said IBA Health's communications and business development director, Greg King. "We have a unanimous recommendation from the board, there's not an alternative offer on the cards, and any alternative would be from private equity, which would see the company break up and probably result in a poorer deal for shareholders."
King said the proposed merger will also have positive ramifications for IBA's Australian customers and shareholders, massively expanding the company's revenues and globalising its market presence.
"If the deal goes ahead, it will mean massive changes, as IBA is currently valued at around AU$0.5bn [£0.21bn], whereas iSoft is valued at over AU$3.5bn [£1.4bn]," said King. "Today we are Australia's largest e-health company, with revenues of AU$430m [£182m]. With iSoft's revenues, that figure would increase fourfold and we would become one of the largest e-health providers in the world."