UPDATE, 13h00 (GMT+1): iSoft have just announced they are discussing the terms of an auction process with the UK Takeover Panel

The UK's Takeover Panel rules were not designed with Schemes of Arrangement, a structure under which a bidder need gain 75% control in order to squeeze out the remaining quarter, in mind. The only previous case the scribe has read of with two competing bids somewhat similar to this involved Tata and CSN's cash bids for Corus. Then, the Takeover Panel made them enter a snap auction. The bottom line now: iSoft have a duty to shareholders to encourage further bids - and it would be a surprise if they do not find a way to do this.

IBA have control of over 25% of the share capital. Yet for all the offensive quality this appears to imply its strongest feature is a defensive one: CompuGroup have over £250m in cash and new debt facilities to throw; IBA circa £180m most of which is, in fact, other people’s money (OPM). So although the IBA stake sabotages the CompuGroup Scheme of Arrangement it is probably aimed more at discouraging an open bidding war that they would lose (as resources and available info stand).

The OPM is Allco, Chairman Cohen’s ex-employer. It is stunning Allco would even consider taking up such diluted equity sitting on a foundation of what are truly extremely modest IBA operations. Justifications of ‘exciting growth prospects’, unless they are ironic, surely refer to the target for they are engaged in the financial equivalent of stuffing a Mini with rugby prop-forwards. And the car will still not go any faster unless they successfully scrum/mug the iSoft/CompuGroup combo.

IBA’s bid is already within £15m of its resources this round. Would Allco stump up more? Who knows, since they are all good friends currently defying prudent financial logic. They must already know Deutsche have been accumulating for CompuGroup since January; and the German firm probably had agreements over at least 15% of iSoft’s shares before IBA’s second cherry bite. Nonetheless, come 27 August when IBA announce annual results expect a bumper production to showcase its bid.

That aside, who knows what else is up various sleeves.

NB: Writer holds iSoft equity; and (hostage to fortune warning) he calculates a final CompuGroup bid (if they come back) 8p to 10p higher would win it.

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