CompuGroup outbids IBA for iSoft

20 Jul 2007

iSoft has today announced that it has accepted an unsolicited £160m all cash offer by Germany's CompuGroup, trumping a previously agreed bid from Australia's IBA healthcare.

The iSoft board met last night and accepted the higher CompuGroup offer, and have withdrawn their previous recommendation for the IBA Health bid. It will now terminate the agreement shareholders voted to accept on 9 July.

CompuGroup, a fast-growing German health software firm, will pay 66 pence in cash for each iSoft share, valuing the British firm at around £160m, a 19% premium on IBA Health's bid.

The German company says that it has reached an agreement with Computer Sciences Corporation (CSC) to sell to it for an undisclosed sum all the iSoft assets relating to the NHS National Programme for IT, including all NPfIT contracts, the NPfIT version of Lorenzo and NHS versions of iCM and iPM.

CSC said in a statement: "CSC confirms that it has held discussions with CompuGroup and that it will acquire those parts of iSoft relating to development of Lorenzo for the NHS."

"As part of the negotiation CompuGroup negotiated the sale of iSoft NPfIT business to CSC of all NPfIT contracts, Lorenzo and NHS versions of iPM and iCM," said Frank Gotthardt, president and CEO or CompuGroup Holding on an investor briefing call today.

No figure for the amount paid to CompuGroup by CSC was announced. CompuGroup will retain iSoft's non-NPfIT client base.

Gotthardt said CompuGroup would not inherit past or future liabilities from the NPfIT contracts. "Responsibility will now largely sit with CSC."

In future ownership of Lorenzo will be "shared" between CompuGroup and CSC. Gotthardt said that over time two separate products would develop out of Lorenzo.

CompuGroup says it had reached an agreement with CSC "on a mutually satisfactory solution" that will enable CSC "to take full control of certain of its obligations in respect of the National Programme for IT (NPfIT) project whilst giving greater certainty to CompuGroup Holding in respect of iSoft's ongoing operations and limiting liability for iSoft on historic and future NPfIT related issues."

CompuGroup says that CSC has agreed that it will not withhold its consent to the change of control of iSoft. Gotthardt said: "We are delighted that iSoft has decided to accept our proposed offer."

"The sale to CSC offers an attractive opportunity for all parties including Connecting for Health."

He added: "The fit between CompuGroup and iSoft is strong with complementary geographic footprints and significant opportunities to leverage industry know how and technical expertise across the enlarged group leading to significant value creation."

John Weston chairman and acting CEO of iSoft, said: "CompuGroup's offer represents, in the view of the board, superior value for iSoft shareholders compared to the offer by IBA."

Link

CompuGroup

Reader's Comments

NHS IPR

24 Jul 07 11:54

All that NHS effort and intellectual property on developing Lorenzo which is now to be bisected - an England view, and a rest of the world.

And CSC will not be able to act as a prime contractor if they are directly delivering the software.

Yet it appears that CompuGroup keep the non-NPfIT elements - GP systems, pathology, pre-existing PAS.

What a complete mess.

Worth reading deeper into this

nhstechie@btinternet.com

28 Jul 07 17:38

There's quite a good summary presentation at the following address;

http://www.compugroup.com/Englisch/eInvestor/eBericht/AnalystPresentation_2007-07-20_final.pdf

iSOFT retain ownership of legacy products excluding those badged with "Lorenzo" i.e. iPM and iIE (no mention of iCM, but that may be an omission) plus Regional Lorenzo (LE3.5/LE4.0). The latter includes the GP variant of Lorenzo - though whether this will survive competition from other products available under GPSOC is open to question.

Other legacy products remain under iSOFT ownership - CSC never had control over them and in my view there was always the risk of a perverse incentive because if iSOFT were to drag their feet in developing Lorenzo this would assure income from Trusts paying for the legacy products Lorenzo was supposed to replace.

As far as I am aware, Lorenzo's IPR was never solely NHS property so I don't understand the first poster's comment.

Also there are precedents for an LSP being a software supplier, at least two of the original well-known bidders for some of the LSP contracts would have been in that position.

To avoid being "post-edited" by Jon, I'll restrict my comment to "sometimes it is a case of better the devil you don't know". I've never had dealings with CompuGroup .............