Australian firm IBA looks to have won the bidding war for key NHS software supplier iSoft as its rival, the German company CompuGroup pulled out of the race.

The NHS supplier is contracted to provide its Lorenzo care records system – a crucial element of the £12.4bn National Programme for IT (NPfIT) – in three out of five NPfIT regions where CSC is the lead contractor.

CompuGroup said it “will not increase its cash offer” of £160m for the troubled software firm. Board chair Frank Gotthardt said: “iSoft would have been an excellent complement to our international business activities, but CompuGroup does not intend to enter into a contest that would lead to prices and risks that are unreasonable.”

In response to CompuGroup’s move, iSoft said it was abandoning plans for an auction, announced last week and would recommend IBA’s latest £166m offer.

“IBA’s cash offer represents superior value for iSoft shareholders compared with that of CompuGroup. iSoft has therefore withdrawn its recommendation of the CompuGroup offer and intends to recommend the IBA cash offer and proceed with the steps necessary to implement the revised IBA offer by way of scheme of arrangement,” the company said.

The iSoft board had initially accepted a £140m bid from IBA, then abandoned it a shock move, after CompuGroup stepped in with a £160m cash offer.

The rival bidders also set out different arrangements covering delivery of the Lorenzo system to the NHS – which is already running more than two years late. CompuGroup had announced that its purchase of iSoft would be followed by CSC’s acquisition of all iSoft's NPfIT contracts, along with an NHS version of Lorenzo and the existing iSoft NPfIT products, i.Patient Manager and i.Integration Engine.

But the new IBA, now accepted by the iSoft board, will mean that the iSoft and CSC teams working on NPfIT will be integrated under CSC’s leadership – but ownership will not pass to CSC.

The tangled tale of iSoft’s attempts to secure a buyer was also complicated by the intervention of CSC, which moved to block IBA’s initial takeover bid, because it felt this would not support delivery of Lorenzo. CSC later gave consent to the sale – over which it has a veto – on the basis that its staff would lead the NPfIT Lorenzo work within iSoft.

A further twist to the saga cannot be ruled out, with CompuGroup reserving its right to increase its offer for iSoft if a third party – other than IBA – announces a competing offer.