As we had predicted in our last Quarterly-Tek (September 2003), currently IBA Health is under tremendous trouble with Torex - their distributor in the UK.

Earlier this year (in March 2003), IBA sold its legacy, UK specific, patient administration system to Torex. Torex was also appointed as their exclusive distributor for their clinical products in the UK, Ireland, Netherlands, Switzerland and Germany.

In July, Torex announced a proposed merger with iSOFT, one of IBA’s major competitors. In October 2003, IBA Health started proceedings to begin legal action against Torex and its chairman Chris Moore. IBA was counting on the Office of Fair Trading (OFT) to refer the merger of Torex and iSOFT to the Competition Commission but the OFT decided on 6th November not to refer the merger to the Competition Commission and gave a green light to the merger. IBA using the new provisions of the Enterprise Act 2002 appealed to the UK’s Competition Appeal Tribunal (CAT) for a review of the OFT’s decision under recently introduced legislation (the Act permits a third party to challenge the OFT’s merger decisions). CAT decided on 3rd December to grant IBA’s application challenging the OFT’s decision and therefore quashing the original merger decision. The matter was referred back to the OFT with a direction to reconsider and make a new decision.

Although iSoft has indicated that it is proceeding with its original timetable for the merger, it seems likely to TekPlus that this will have to be put on hold especially if the OFT reconsiders and refers the transaction to the Competition Commission. They could also be a appeal to CAT’s decision from the OFT, iSoft or Torex. TekPlus believes whether the Torex and iSOFT merger proceeds or not, it is definitely costing IBA Health a high price. Its UK business, which contributed to nearly 17% last year and its channel to Europe are facing big question marks right now especially given the huge recent wins by iSoft in the NHS National Program for IT. We believe IBA will find it hard to recover and seriously needs to consider partnering big time.

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