It is understood that two American healthcare firms — Cerna and McKesson — and General Atlantic Partners, the American private equity firm, are meeting Computer Sciences Corporation (CSC), a top NHS contractor that subcontracts the government work to iSoft. “It’s got to a critical stage where to get any further they need to meet with CSC,” a source close to the process said.

John Weston, iSoft chairman and acting chief executive, told shareholders in October at the company’s annual meeting that it had been approached by financial and trade buyers that were keen to buy the company, take a large stake or form an alliance and that the board had entered talks.

Sources close to the process said that iSoft had been in discussions ever since and has narrowed the bidders to a shortlist of three or four. The bidders have had access to its books to conduct due diligence and are ready to proceed with final bids.

“Now we’re beholden on CSC to be comfortable with them,” the source said.

Shares in the IT group lost more than 90 per cent in 2006 after a string of profit warnings and the discovery of accounting irregularities, which led the firm to restate its books and wipe out most of its previous profits. The scandal is the subject of a continuing investigation by the Financial Services Authority.

The shares closed at 49.5p yesterday.

ISoft was given a lifeline by its banks, but the interest-rate payments on the loans are such that it needs to find new equity fast, or face another cash crunch, the sources said.

Of the three bidders, General Atlantic Partners already owns a small stake of about 6 per cent in iSoft and is thought to be keen to snap up more. It recently bought a healthcare software firm Eclipsys in the United States and could derive synergies from the two.

McKesson is one of the largest drugs distributors in the US but has been slow to expand overseas. Cerna runs the other key NHS contracts that iSoft does not already own, in London and the South, so buying up iSoft would effectively put the American company in control of all the UK’s patient records systems.

If CSC can not get comfortable with any of the bidders, then it could bid for iSoft itself, the sources said, although it is in the IT firm’s interest to push through a sale, they added.

Mr Weston has also discussed the possibility of launching a rights issue to help it to pay back its debt, but analysts said that it would be hard to get shareholders to back it.

“The public equity route would have to come at a very substantial discount,” Milan Radia, a technology equity research analyst at Jefferies, said.

Hard knocks

April 2006: iSoft issues a profit warning; to miss forecasts by £25 million

June 8: changes accounting policy, wiping out profit from previous years

June 14: Tim Whiston, chief executive, resigns

July 7: delays annual results while in talks with its bankers

July 20: auditors at Deloitte find possible irregularities

August 24: the FSA announces investigation into accounting irregularities

October 18: says problems with its NHS contract will cut revenue by up to 15 per cent; tells shareholders it is intalks with potential buyers; appoints bankers to advise on possible takeover

October 24: AIDB announces inquiry into iSoft and directors

December 11: First-half net debt jumps from £42m to £74m; enters talks with Irish health service after admitting it is unable to meet service's software deadline

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