National Health Service (NHS) software supplier iSoft and its prospective buyer, Australian software firm IBA, are gearing up for legal action against CSC after the IT services giant blocked iSoft's proposed £140 million sale.
IBA and iSoft issued a joint statement, suggesting that CSC – the lead contractor for the NHS's £12.4 billion National Programme for IT (NPfIT) in three out of five regions – had a recent change of mind about the sale after earlier positive indications.
John Weston, chairman and acting chief executive of iSoft, said: "We are seeking urgent clarification from CSC regarding the reasons for the recent changes in their position and are initiating proceedings to ensure that consent is not unlawfully withheld."
CSC withheld its consent for the sale this week, claiming that the move would not support successful delivery of NPfIT.
Instead, the IT services firm wants to beef up the numbers of its own staff working inside iSoft, which is contracted to supply its Lorenzo care records system – a crucial part of NPfIT.
Troubled iSoft was put up for sale after revealing continuing financial losses. It is also under investigation by the Financial Services Authority after irregularities were found in its 2004 and 2005 accounts.
In a statement explaining its motives, CSC said it was "committed to the successful delivery" of NPfIT. "CSC's decision not to consent to the proposed change in control of iSoft has been governed solely by what it considers is in the best interests of achieving this goal," it said.
CSC had undertaken due diligence to assess the impact of the IBA transaction on NPfIT, it said. "Our ongoing discussions and correspondence with iSoft clearly reflected CSC's concerns and position, resulting in CSC confirming on 28 May, that it does not intend to consent to the IBA transaction."
But iSoft and IBA – with trading in its shares suspended since CSC's intervention in the proposed sale – hit back at the lead NHS contractor. IBA executive chair Gary Cohen said: "IBA and iSoft were surprised at the receipt of the letter from CSC in the light of previous discussions which both IBA and iSoft had held with CSC."
Both software firms were seeking urgent talks with CSC to resolve its concerns, but were considering further action, he said. "IBA and iSoft have also been advised that there is a reasonable basis for arguing that CSC has unreasonably withheld and/or delayed its consent. Both IBA and iSoft are considering their rights and what further action to take in the light of this advice."
Cohen said IBA's proposed financial plan for iSoft would provide the financial stability to ensure its work on NPfIT was on a sound footing.
He added: "The boards of IBA and iSoft have confirmed their commitment to the flagship products of the NHS programme and to the delivery of iSoft's existing contractual commitments to CSC."
Weston said iSoft's directors stood by their intention to unanimously recommend the IBA deal. "We believe IBA's offer and the associated refinancing of the combined business's balance sheet will secure iSoft's financial position and enhance its ability to meet commitments to the NPfIT programme."