IBA Healthcare, the Australian IT group, is expected to launch a £132.3 million all-share bid for iSoft, the embattled NHS software services company, next week.

Under the proposed merger, which would create the largest healthcare IT group outside America, iSoft shareholders would be offered 1.1 new IBA shares for each iSoft share, valuing the British company at A$1.38 (56.9p) a share. Shares in iSoft closed at 48p on Friday.

IBA shares, which trade on the Australian Securities Exchange, were frozen yesterday to enable the group to hold meetings with institutional investors with a view to raising A$200 million (£82 million) of new equity to help to fund the acquisition of iSoft.

The halt in trading lasts four to six days, during which IBA is hoping to raise the new equity through an institutional placement and a rights issue to existing shareholders.

BACKGROUND

• ISoft merger back on course

• CSC prepared to offer cash for iSoft

• CSC 'to counterbid for iSoft' says NHS supplier

• Problems at Isoft are far from over

• Sparks fly between ISoft and CSC

ISoft comment: The hardline

ISoft is considering legal action against CSC over its attempt to block a sale to IBA. Read the comment here.

Related Internet Links

• ISoft company information

• ISoft share price chart

• ISoft forecasts

That funding is supported by A$315 million in new debt facilities underwritten by ABN Amro, which has been secured subject to the successful completion of IBA’s equity raising.

The debt would be used to refinance iSoft’s existing £93 million of debt and underpin the development of its core Lorenzo product and the NHS IT modernisation programme.

A spokesman for iSoft said: “We welcome this development.” IBA, which announced its interest in iSoft in February, said that it expected cost synergies from the combination of the two companies to exceed A$27 million in the year to June 30, 2009.

It is understood that the company would consider a secondary listing in the UK to satisfy iSoft investors who are not allowed to hold stock on foreign exchanges.

ISoft, which is being investigated over potentially misleading statements to the City, plays a crucial role in the up-grade of the NHS’s IT systems. The alleged accounting irregularities, profit warnings and delays on contracts plunged it into crisis last year.

The company called in Morgan Stanley and Gleacher Shacklock late last year to help to organise a restructure. It is hoped that a sale will help to resolve long-term funding issues. The company has a £141 million debt facility that which must be renegotiated by November 14.

IBA faces potential opposition in its bid for iSoft from McKesson, an American drugs distribution company, General Atlantic, the private equity firm, and Cerner, an American group. Any bidder must gain the approval of Computer Sciences Corp, the American company that holds the contract for iSoft’s key NHS work.

ISoft revealed last week that it expected revenues for the year to the end of April to be at the upper end of a predicted £171 million to £181 million range. Analysts said that the up-date, berfore annual results in July, suggested that iSoft would make a small profit for the year.

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