UK National Health Service contractor CSC is set to buy the division of troubled software supplier iSoft that is developing the Lorenzo care records system at the heart of the NHS’s £12.4 billion National Programme for IT (NPfIT).

The news follows the shock decision of the iSoft board to recommend a £160 million bid for the company by German firm Compugroup in place of an expected £140m takeover by Australian firm IBA.

Continuing uncertainty over the future of iSoft has raised questions over the delivery of the Lorenzo care records system – which is already running more than two years late. Lorenzo is set to be supplied as a crucial NPfIT component in three out of five regions where CSC is the lead contractor.

CSC had initially blocked iSoft’s move to sell to IBA, because it felt this would not support delivery of Lorenzo.

But after iSoft threatened legal action – and NHS Connecting for Health, which runs NPfIT, intervened to bring the two sides together – the two companies agreed to integrate their teams working on Lorenzo, under CSC’s leadership and the IT services firm gave the green light to IBA’s acquisition.

CSC, which already had around 100 of its own staff working on Lorenzo within iSoft, was expected to step up that number and assume greater control.

But now that iSoft has abandoned the IBA takeover in favour of a higher cash offer from Compugroup, CSC will take ownership and control of the business delivering Lorenzo to NPfIT.

The lead NHS contractor has confirmed that it has “held discussions with Compugroup and that it will acquire those parts of iSoft relating to development of Lorenzo for the NHS.”

Crisis-stricken iSoft has been seeking a buyer since last year, when it reported a string of losses and was hit by a Financial Services Authority investigation into accounting irregularities.

CSC has had the power to veto the software firm’s sale and significant step-in rights following an agreement between the two companies made last year as iSoft’s troubles mounted.

Gary Cohen, executive chairman of IBA, said Compugroup’s eleventh hour cash bid and the iSoft directors’ acceptance of it were “surprising” developments. The Australian firm was “considering the options available to it” and would make a further announcement later, he said.