CSC Enters into Agreement to Acquire iSOFT

4th April 2011. Multinational computer services firm CSC (NYSE: CSC) today announced it has signed an agreement to acquire all of the outstanding equity of iSOFT Group Limited (ASX: ISF), one of the world’s largest providers of advanced healthcare IT solutions, by way of a court-approved scheme of arrangement.

The offer to iSOFT shareholders is at A$0.17 per share in cash. The deal implies an enterprise value of about $480m. If shareholder and regulatory approvals are granted, CSC has agreed to immediately pay iSoft’s bank debt of about $260m and will also pay out a convertible note, estimated at $40m, to major shareholder Oceania Capital Partners (OCP, formerly Allco Equity Partners).

Closing of the transaction is expected during CSC’s Q2FY12, and is subject to various conditions, including, among others, iSOFT shareholder approval and certain Australian and EU regulatory approvals. The consideration of A$0.17 in cash per share represents a premium of:

  • 227% to the last traded price of $0.052 per share on Thursday 24 March 2011, being the last day on which iSOFT shares traded prior to this announcement;
  • 270% to the one month volume weighted average price to 24 March 2011 of $0.046 per share; and
  • 209% to the three month volume weighted average price to 24 March 2011 of $0.055 per share.

The Board of iSOFT intends to unanimously recommend that iSOFT shareholders vote in favour of the Scheme at the scheme meeting, in the absence of a superior proposal and subject to an independent expert concluding that the Scheme is in the best interests of iSOFT shareholders. Subject to those same qualifications, each Director of iSOFT will vote all the iSOFT shares held by them in favour of the Scheme at the Scheme meeting.

Listed investor Oceania Capital Partners Limited (ASX: OCP), which owns approximately 24.5 per cent of the issued shares of iSOFT, 45.9 million convertible notes and 4.2 million warrants, has indicated its support for the transaction subject to there being no other proposal put forward prior to the date of the iSOFT shareholder vote which OCP considers to be superior for OCP and its shareholders, and an independent expert concluding, that the Proposal is in the best interests of iSOFT shareholders.

Immediately following completion, it is expected that iSOFT’s senior banking facilities and convertible notes will be repaid in full.

The buy-out proposal follows a run of increasingly bad news from iSoft. In February, it reported an $84.1 million net loss in the first half of the 2011 financial year due to restructuring costs and impairment charges. The company, which had made a $4.8 million profit in 1H10, spent the most recent half attempting to restore the financial health of the business. In December it began selling off parts of its business to pay down its debts. The first to go was its financial management solutions unit, iSoft Business Solutions (iBS), to Capita Group PLC. Earlier in the month it appointed acting chief executive, Andrea Fiumicelli, as its new permanent CEO. Fiumicelli was named acting CEO in September, following the resignation of Gary Cohen from the position.

The proposal from CSC arises from the strategic review initiated by the Directors of iSOFT following the conclusion of the FY10 financial year, with the intention of examining ways to maximise the value for existing shareholders and reduce group indebtedness. The review also included investigation of recapitalisation proposals and asset sales. The proposal from CSC is considered by the Board of iSOFT to offer the best outcome for all stakeholders taking into account the proposed price and expected timing of completion.

Commenting on the proposed acquisition, iSOFT Chairman Bob Ellis said: “The proposed acquisition enables shareholders to realise cash for their iSOFT shares at a significant premium to recent trading levels. It provides for the repayment of all iSOFT senior banking facilities and convertible notes. In addition, CSC’s global scale and financial strength can be expected to lead to improvements in iSOFT’s ability to deliver services to customers and provide employees with additional opportunities.”

The acquisition will complement and strengthen CSC’s market-leading software products and healthcare integration and services portfolio, while enhancing its healthcare research and development capabilities. It will also accelerate CSC’s strategic growth plan in the Life Sciences market and reinforce the company as a very strong player in healthcare information technology.

Adding iSOFT’s 3,300 global employees including those from major research and development centers in India, Spain, UK, Australia, New Zealand and Central Europe, will expand CSC’s capability to support existing customers, develop more innovative solutions, and add a robust set of clients in new and emerging markets.

“The combination of these companies will further establish CSC as an innovative leader in global healthcare IT,” said Michael W. Laphen, CSC chairman, president and chief executive officer. “Through our combined experience in global healthcare delivery, complementary world-class healthcare software solutions, and enhanced capabilities in system integration, outsourcing and process management, we are forming a compelling lifecycle of services to better serve our global clients and improve patient care.”

More than 13,000 healthcare providers and governments in 40 countries use iSOFT’s e-health software solutions to manage patient information and drive improvements in their core processes. With the expertise and experience of more than 1,300 development professionals and more than 200 clinicians, iSOFT solutions touch more than 200 million patients across five continents every day, and its systems are installed in more than 8,000 hospitals and clinics. This scale has allowed iSOFT to keep abreast of the latest trends in healthcare technology and practices and translate them into innovative and practical solutions.

“iSOFT’s Electronic Health Record software and services, coupled with CSC’s global healthcare expertise and delivery capabilities, will create a very powerful force in the global healthcare market to enhance the provision of integrated care,” said Andrea Fiumicelli, chief executive officer of iSOFT. “This is a great development for iSOFT’s employees as they will have the opportunity to continue their important work in healthcare IT whilst developing their careers across CSC’s global business.”

“When completed, this acquisition will be a critical step in the expansion of our global healthcare business. CSC will be at the forefront of emerging healthcare technologies, giving our clients access to an expanded range of healthcare capabilities and continuing our journey of bringing the vision of a single patient record to life,” Laphen added.

Perella Weinberg Partners LP is acting as financial advisor to CSC and Jones Day is acting as legal advisor to CSC. UBS AG and Gleacher Shacklock LLP are acting as financial advisers to iSOFT and Baker & McKenzie is acting as legal adviser to iSOFT.

About CSC
CSC is a global leader in providing technology-enabled solutions and services through three primary lines of business. These include Business Solutions and Services, the Managed Services Sector and the North American Public Sector. CSC’s advanced capabilities include system design and integration, information technology and business process outsourcing, applications software development, Web and application hosting, mission support and management consulting. The company has been recognized as a leader in the industry, including being named by FORTUNE Magazine as one of the World’s Most Admired Companies for Information Technology Services (2011). Headquartered in Falls Church, Va., CSC has approximately 93,000 employees and reported revenue of $16.2 billion for the 12 months ended December 31, 2010. For more information, visit the company’s website at www.csc.com.

About iSOFT Group
iSOFT Group Limited (ASX: ISF) is the largest health information technology company listed on the Australian Securities Exchange, and among the world’s biggest providers of advanced application solutions in modern healthcare economies. iSOFT works with healthcare professionals to design and build software applications that answer all of the difficult questions posed by today’s healthcare delivery challenges. Our solutions act as a catalyst for change, supporting free exchange of critical information across diverse care settings and participating organizations. Today, more than 13,000 provider organizations in over 40 countries use iSOFT’s solutions to manage patient information and drive improvements in their core processes. The group’s sustainable development is delivered through careful planning, in-depth analysis of the market, and anticipation of our clients’ evolving requirements. Our business is driven by the collective talent, experience and commitment of more than 3,300 specialists in 19 countries worldwide. A global network of iSOFT subsidiaries, supported by an extensive partner network, provides substantial experience of national healthcare markets. As a result, we offer our clients comprehensive knowledge of local market requirements in terms of culture, language, working practices, regulation and organizational structure.

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