Potential purchase of iSoft said to be nearing end-game

Newspaper reports today say that troubled software supplier iSoft is in talks with three final-stage bidders, naming US healthcare firms Cerner and McKesson, together with private equity firm General Atlantic Partners.

According to the report in The Times discussions are at a late stage for the sale of the health software firm, which is at the heart of the £6.2bn NHS IT programme, for approximately £200m.

The three potential bidders are said to be meeting with and being vetted by Computer Sciences Corporation (CSC), which is a prime contractor to the NHS IT programme in three of its five regions. In each of these ‘clusters’ – the northwest and west midlands, eastern and north east – CSC’s main software sub-contractor is iSoft

"It’s got to a critical stage where to get any further they need to meet with CSC," an un-named source close to the process told the Times.

A CSC spokesperson told EHI: "CSC are not in a position to comment on speculation in the Times article. We continue to work closely with iSOFT, and will be helping them to reach a conclusion in respect of any potential suitors. "

An iSoft spokesperson told EHI "We are in discussion with a number of external parties and we will make a statement when ready."

Reports in recent weeks had also linked Siemens as a possible buyer for iSoft, which was effectively put up for sale last October by chairman and acting chief executive John Weston. CSC itself has also been suggested as a possible buyer.

In October Weston said: "In recent months the Board has also received expressions of interest from a number of parties interested in acquiring iSoft or creating a strategic alliance with the Company."

Shares in iSoft lost more than 90% of their value in 2006 after the company issues a series of profit warnings, which led the firm to restate its accounts wiping out most of its historic profits.

On August, iSoft reported a £382m annual loss but said that it has reached a funding deal with its banks, and signed a new memorandum of understanding with Computer Sciences Corporation. The short-term funding iSoft secured is understood to rapidly ratchet up in cost over the next few months.

iSoft’s financial difficulties have been compounded by problems in the development and delivery timescales of its flagship Lorenzo next generation software meant to have become available to NHS customers from late 2004.

Of the potential bidders named by the Times Cerner appears the most difficult for the Department of Health and government as it would mean the company, which provides clinical software for the two other English NHS regions, would become the monopoly supplier.

McKesson is one of the largest drug distributors in the US and is already active as major IT supplier in the NHS, but failed to be picked as a supplier in the original NPfIT procurement.

Of the three firms named the dark horse may prove to be General Atlantic Partners, which is reported to already own a small stake in iSoft and which recently bought up US healthcare software firm Eclipsys.

iSoft bought Eclipsys’ Uk operations in 2002 and in 2003 Eclipsys and iSoft subsequently announced a global development partnership, sharing components and basing their respective future software developments on Microsoft .Net technology.

The final option may be for CSC to purchase iSoft itself, the company has already secured step in rights to manage iSoft’s future software development when it renegotiated its deal with the company last August.