Isoft – Torex marriage postponed

Proposed merger sent back to UK Court of Appeal

A new ruling by the UK Court of Appeal means that the proposed $1.2 billion merger between healthcare services providers Isoft Group and Torex is no closer to being given the green light. This setback may reduce their chances of winning lucrative NHS services contracts.

The UK Court of Appeal has ruled that the Competition Appeals Tribunal "adopted a wrong test" in assessing and judging that the planned merger would be anti-competitive. The Office of Fair Trading says that the ruling is good news since it means that the OFT now has more control over the merger process, and is able to establish what tests need to be applied to mergers and acquisitions.

The Isoft and Torex merger case is the first test of the new Enterprise Act of 2003, that involved the proposed deal being cast into doubt last December after the CAT reacted to concerns from Australian rival firm IBA Health that it could be anti-competitive.

However, the OFT believed that there would not be any lessening of competition in the UK marketplace despite both Isoft and Torex having strong positions in the UK healthcare software services market. The OFT then launched its appeal with the Court of Appeal to confirm whether CAT had employed the wrong tests to come up with its judgment.

The ruling by the Court of Appeal means that the merger is going to be passed back to the OFT for consideration once again. The whole process could be drawn out even further and it is likely to be sent again to the Competition Commission for assessment.

Any further delay to the judgment on whether the merger will go ahead is likely to cause a serious headache for Torex and Isoft, which have both bid to secure a larger share of the multiple-billion dollars' worth of NHS services contracts recently handed out to Accenture, CSC, Fujitsu and BT.

The companies claim that the merged group would be better placed to service the requirements of the National Application Service Providers and the LSPsin the five geographic regions in England. Isoft has already lost out on a £896 million piece of the final NHS IT services contract, which was awarded to a consortium led by Fujitsu Services in January.

Source: ComputerWire/Datamonitor

Related research: Datamonitor, 'Strategic Enterprise Networking Opportunities", (DMTC0849).

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