ASX-listed Aussie upstart IBA Health is a step closer today to closing the deal on its proposed takeover of beleaguered UK-based eHealth supplier iSoft, with IT behemoth CSC providing written consent for the deal to go ahead.
Despite securing a key role with CSC in the UK's National Program for IT (NPfIT) in 2005, iSoft's fortunes took a turn for the worst in 2006, when a series of accounting discrepancies lead to an investigation from the UK's regulator the Financial Services Authority. This in turn lead to revenue revisions, and a massive shareholder exodus which left lenders and contract partner CSC redrawing contracts.
The company's value was reduced from over 4 pounds 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 effect the ability of the formers 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 which includes 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, 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$0.5 billion, whereas iSoft is valued at over AU$3.5 billion," said King. "Today we are Australia's largest eHealth company with revenues of AU$430 million. With iSoft's revenues that figure would increase four fold, and we would become one of the largest eHealth providers in the world."