CSC approves IBA’s purchase of iSoft

iSoft Group Plc has announced that it has this morning signed an agreement with Computer Sciences Corporation that will see CSC take over development of the development the late-running Lorenzo software for the NHS IT programme.

As part of the deal CSC has formally consented to the purchase of iSoft by Australia’s IBA Health.

ISoft says that CSC has indicated in writing that it consents to a change in control of iSoft. "Accordingly, iSoft has agreed to terminate legal proceedings regarding CSC withholding consent."

Crucially for NHS customers the new agreement will see CSC take responsibility for the intellectual property of Lorenzo for delivery in its three clusters of the NHS IT programme, together with responsibility for the code streams i.Patient Manager (iPM) and i.Integration Engine (iIE) for the National Programme, two of iSoft’s key current products.

Under the agreement iSoft and CSC will integrate their teams involved in the development of Lorenzo under CSC’s leadership. The Lorenzo product was initially due for delivery to the NHS in late 2004.

ISoft will retain the IP to Lorenzo and rights to exploit it outside the three CSC clusters. The company said it "does not anticipate that the changes to the contract will impact its long term strategy of developing Lorenzo as its strategic product to be sold internationally".

The company also says ‘the provision and support by iSoft for other customers will be unaffected".

John Weston, chairman and acting CEO of iSoft said: "I firmly believe that these new arrangements with CSC represent an excellent outcome for both the NHS and iSoft. The new management structure will streamline the processes to ensure the delivery to the NHS of a quality product on time."

He added: "This clears the way for the merger with IBA, which represents an excellent outcome for our business and shareholders, and provides the long term financial stability which we have been seeking."

Guy Hains, president of CSC’s European Group said: "We are delighted to have successfully concluded these discussions and acknowledge the significant contribution Connecting for Health has made in bringing all parties together to determine a satisfactory outcome. Together with the NHS and iSoft, we are excited about Lorenzo and believe that the new agreement will successfully support the final stage of its development and delivery starting next year."

Gary Cohen, executive chairman of IBA said: "The agreement which iSoft and CSC have reached provides a robust platform for delivery of Lorenzo and enhances iSoft’s financial position. I fully endorse it and congratulate the team on the outcome. We remain enthusiastic about the merger of our companies."

Some two thirds of the license payments to iSoft will be calendar-based with the remainder based on mutually agreed milestones. iSoft says that there will be a reduction in license fees of around 5%, chiefly after 2010, but says in total its contract with CSC for the whole of the NPfIT programme will be about £300m in value.

The final hurdle remaining for the iSoft/IBA deal to go ahead is for approval by iSoft’s shareholders. The deal is recommended by the iSoft board and a shareholder meeting is scheduled for 6 July.