IBA offer recommended by iSoft board

Australian health information firm IBA Health Ltd. has agreed to buy the UK’s iSoft Group for about £140m, plus debt.

IBA will finance the repayment of iSoft’s existing bank facilities, which are repayable upon a change of control, and the ongoing capital requirements of the enlarged group, by raising £84m.

The deal has been recommended by the iSoft board a company spokesperson confirmed to E-Health Insider last night. If completed, the deal would see IBA become the leading supplier of clinical software to the £12bn NHS National Programme for IT (NPfIT).

In a statement iSoft said: "The iSoft directors and the IBA directors are pleased to announce that they have reached agreement on the terms of a recommended all-share offer, to be effected by means of a scheme of arrangement, under which a wholly-owned subsidiary of IBA will acquire the entire issued ordinary share capital of iSoft, creating one of the largest international providers of healthcare information systems."

IBA said the enlarged group would provide information technology systems to about 13,000 hospitals and clinics throughout Australsia and Europe, and would be well-positioned for further growth.

IBA executive chairman, Gary Cohen said: "The merger of two leading healthcare IT companies will create one of the largest providers of health It solutions in the regions from Europe through to Australasia."

John Weston, chairman and acting CEO of iSoft said: "We believe that this offer from IBA and the associated refinancing of the combined group’s balance sheet will enable continuity on NPfIT on a sound footing and will establish a platform for growing the company in the future."

The company said that the deal would "unite two experienced management teams with complementary skills and proven track records in the healthcare IT market". It added that the deal would also "enhance the enlarged group’s capability to deliver and complete the development of Lorenzo, iSoft’s strategic product. Lorenzo would form the basis of the enlarged group’s next generation product suite."

If completed the deal would propel IBA into the premier league of leading US and European health IT software companies. Following the merger an estimated 80% of revenues will come from the UK.

Gary Cohen, executive chairman of IBA will retain his position in the enlarged group. John Weston, currently chairman and acting CEO of iSoft will join the board of the enlarged group as deputy chairman. Steve Garrington, currently CEO of IBA, will become group managing director for the enlarged group.

Bill Henry, currently COO of iSoft, will become joint group managing director, and will be responsible for the development of Lorenzo and the company’s position in the NPfIT.

Shares in iSoft plunged 85% last year amid delays in delivering key software in the NHS IT project. The company is also under investigation by the UK financial watchdog over irregularities in its past accounts.

The offer is subject to a number of conditions, including shareholder approval the consent of Computer Sciences Corporation which subcontracts work to iSoft on the NHS IT programme.

Discussions have already been held with CSC which is said to have indicated its consent would be forthcoming at completion of the offer, "CSC will need to be satisfied that the acquisition by IBA will enhance the ability of iSoft to deliver under NPfIT. These discussions are continuing."

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Comment & analysis  Deal or no deal?