iSoft and IBA consider legal action on CSC veto

IBA Health and iSoft announced today that they were both considering legal action over Computer Science Corporation’s (CSC) attempt to block IBA’s purchase of the troubled healthcare software provider.

iSoft wishes to sell to IBA but finds itself frustrated by a ‘step-in’ clause in its major contracts with the NHS which give CSC a veto on any deal. CSC is the local service provider for the three English NHS regions where iSoft is the major sub-contractor for clinical software installed under the National Programme for IT.

CSC exercised its right to block the sale at the beginning of this week explaining that its action was “in the best interests of the National Programme for IT.”

Today’s statement from iSoft and IBA indicates that any legal action relating to CSC’s objections would centre on whether the US corporation had unreasonably withheld or delayed its consent to the deal.

IBA Health executive chairman, Gary Cohen, said “IBA and iSoft were surprised at the receipt of the letter from CSC in the light of previous discussions which both IBA and iSoft had held with CSC. Both IBA and iSoft are seeking urgent further discussions with CSC to resolve any issues and concerns that CSC may have so that CSC can consent to the merger.

“IBA and iSoft have also been advised that there is a reasonable basis for arguing that CSC has unreasonably withheld and/or delayed its consent. Both IBA and iSoft are considering their rights and what further action to take in the light of this advice.

“The financial plan proposed by IBA will provide the financial stability and continuity to iSoft to ensure the NPfIT programme is on a sound footing and will provide a platform for growing the business in the future.

“The boards of IBA and iSoft have confirmed their commitment to the flagship products of the NHS programme and to the delivery of iSoft’s existing contractual commitments to CSC. We will work with the board of iSoft to secure the CSC consent,” concluded Cohen.

John Weston, chairman and acting CEO of iSoft, said “The iSoft directors maintain their stated intention to recommend unanimously to iSoft shareholders to vote in favour of the all-share offer under which IBA will acquire the entire ordinary share capital of iSoft, and which represents the most attractive option for our shareholders.

We believe IBA’s offer and the associated refinancing of the combined business’s balance sheet will secure iSoft’s financial position and enhance its ability to meet commitments to the NPfIT programme. We are seeking urgent clarification from CSC regarding the reasons for the recent changes in their position and are initiating proceedings to ensure that consent is not unlawfully withheld”, concluded Weston.