iSoft and Torex, two of the UK’s leading health IT firms announced this week that they intended to merge to create the UK’s largest provider of healthcare information systems able to play a leading role in the National Programme for IT (NPfIT) in the NHS and be a leading player internationally.
The two companies said on Tuesday they were in "advanced discussions" over a merger. The new merged company will be called iSoft and have a combined worth of over £700m. An offer to shareholders will be launched in 40 days and if all goes smoothly the merger would be completed by the autumn.
According to a release by iSoft the merger of the two firms will create a fully integrated software provider and healthcare information systems group with the expertise and experience to participate more fully in the £2.3 billion NHS IT Modernisation Programme.
Tim Whitson, group finance director at iSoft told E-Health Insider: “It’s an opportunity to create a British industrial strength supplier able to better meet the requirements of the national programme.”
He added: “If you look at the characteristics of the two businesses they are entirely complementary.” Mr Whitson stressed that iSoft is focused on applications, while Torex focused on delivering services and domain expertise.
The iSoft finance director confirmed to E-Health Insider that the merged company would principally be offering iSoft products in the future. “Torex products won’t be offered as part of the new product sets in ICRS.” He added that Torex products would continue in some form in the primary care market.
Integration of the two companies and their respective stables of products may still prove a challenge though. An executive from a rival US firm bidding for work from the National Programme, commented: “They’ve both got big integration issues already, and there is an awful lot of history between them.”
Both companies are bidding for contracts as part of the NPfIT and known to be involved a number of the consortia bidding to become Local Service Providers (LSPs). Torex and iSoft are both understood to be part of the Plexus Care consortium being led by EDS and Logica.
Mr Whitson commented: “The feedback from the LSPs we have been talking to has been very positive.”
Mark Sprigg, commercial director with Torex, added. “Both ourselves and iSoft have managed to get our relationships sorted with LSPs.” He added: “The benefits behind this are to put together an organisation that will be better able to serve the needs of the National Programme.”
Industry sources contacted by E-Health Insider, however, professed to be perplexed by the timing of the announcement, coming just as the procurement process for the NPfIT reaches a critical stage.
One industry source added that iSoft was perceived to have built better partnerships with the prime contractors bidding to win the five regional LSP contracts to be awarded from this October.
A clear goal of the proposed merger is to create a firm that can compete on the international stage. Torex is currently strong in Holland, Germany and Switzerland while iSoft is well established in markets including Ireland, Scandinavia, Australasia and Asia. The combined group would have annual revenues of more than £200 million and about 2,600 staff in the UK, continental Europe, Asia and Australia.
Under the terms of the deal, iSoft would offer 1.7692 of its shares for each Torex share, keep its name and hold 56 per cent of the merged entity. The board of the new merged group will comprise six non executive directors, four to be nominated by iSoft and two to be nominated by Torex.
Following completion, Patrick Cryne, the current chief executive of iSoft, will assume the responsibility of executive chairman of the merged group and Chris Moore, the current chairman of Torex, will become chief executive. Steve Garrington, the current chief executive of Torex Health will become director of operations.
One potential barrier to the proposed merger could be a possible referral from the Office of Fair Trading to the Monopolies and Mergers Commission, a possibility given that the new combined iSoft group would have an estimated 53% combined market share.