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IBA Health, the Australian software group, has announced it is in talks with Isoft about a possible all-share offer for its struggling UK peer that could lead to a recommended takeover bid.
In a statement to the Australian Stock Exchange on Friday morning, IBA added it was in talks with several institutions about backing for the deal which would refinance existing debt facilities and provide adequate working capital for the needs of the enlarged group.
Like Isoft, the group provides healthcare software including electronic patient records and integrated software management systems.
It is Australia’s largest listed healthcare software company, with a market capitalisation of over A$560m ($438m, £225m), compared to Isoft’s market capitalisation of just over £100m. Its chief executive is Steve Garrington, who has previously worked at Aim-listed software companies Torex Retail and Ascribe.
Isoft said on Thursday it was still continuing to consider a number of options to determine the most appropriate route forward for the company and its shareholders.
Shares in Isoft closed down ½p at 45p in London on Thursday.
Isoft said in October it was in takeover talks with both financial and trade buyers after delays in the delivery of its software for the £12.4bn upgrade of the National Health Service’s information technology systems triggered a series of profit warnings.
Since then the group has put together a shortlist of bidders who have had access to its books. Isoft has said it hoped to make a statement “in the early weeks of 2007”.
Potential buyers are being vetted by Computer Sciences Corporation, which is a prime contractor to the NHS IT programme in three of its five regions.
Co-operation with Isoft has increased since the summer, with CSC sending a management team to increase productivity at Isoft’s underperforming software development business in India.
IBA also has a large research and development facility in Bangalore
IBA successfully overturned the Office of Fair Trading’s initial decision to allow the merger between Isoft and Torex in late 2003, on competition grounds, and the merger was only granted pending the disposal of an asset.
It won a payout of AS3.1m from Isoft and costs from the UK Competition Appeal Tribunal on its appeal.
Several other parties remain interested in Isoft. These include McKesson, one of the largest healthcare groups in the US, which was an established supplier to the NHS. However, it lost out when the National IT project contracts were awarded in 2003.
General Atlantic, the private equity group, is also bidding for Isoft. It owns a 6 per cent stake in the group and Rene Kern, a member of its executive and investment committees, is a non-executive director of Isoft.