NB: Originally published 23 July. Republished verbatim 22 Aug less balance sheet exhibit pending IBA's new cash offer.

Since CompuGroup tabled their cash bid for iSoft at 66p/share the market has assumed no further bids will be forthcoming. That is, iSoft equity is trading slightly below the 66p offer.

A comparison of the latest bid versus IBA's effort (in the shape of what the balance sheet of either combined group might look like) shows how different the approaches are: CompuGroup is leveraging hard, perhaps in part because of an unwillingness by the founder to reduce his two thirds controlling stake. IBA, on the other hand, has room to make a fight of the sale via additional leverage and could up its offer with a cash component.

As is, it appears that one of these bidders is either badly underestimating the earnings capacity of the enlarged company; or the other is doing just the opposite. If the correct assessment is in between observers ought to ask themselves what the downside is on a punt at circa 64p.

Usual disclaimers.

NB: Scribe holds iSoft plc equity

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