IBA raises offer in bidding war for iSoft

A bidding war has erupted for embattled NHS software provider iSoft, with Australia's IBA Health raising its takeover bid from £140 million to £166.3 million after being outbid last month by Germany's CompuGroup.

IBA's new offer is 4.5 per cent higher than CompuGroup's offer of £160 million - itself a 19 per cent premium on IBA's first offer. If the deal goes through, Allco Equity Partners (AEP) will in turn make a strategic investment in IBA of up to A$300 million (£121 million), the firm said.

IBA's executive chairman Gary Cohen said the merger would create one of the largest IT health solutions providers from Europe to Australia. "The strategic logic for this merger remains compelling and the merits of the transaction are further endorsed through AEP's cornerstone investment," he said. "Our revised offer will enable iSoft shareholders to choose whether to accept cash or to accept IBA shares and benefit from the expected growth of the combined group."

IBA said the combined group would hold a key position in the NHS' £12 billion national programme for IT (NPfIT). Earlier this year, iSoft's biggest customer CSC agreed to contract changes concerning iSoft's Lorenzo software for the programme.

"It preserves key relationships with iSoft customers and employees, ensures the Lorenzo IP [intellectual property] is retained and enhances the value of the combined IBA and iSoft business," Cohen said of the deal.

In a statement, iSoft said its board would consider the revised IBA offer and respond in due course.

And CompuGroup said that it was "currently considering its position," and urged iSoft shareholders to take no action yet.

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