Sydney, Nov 8, 2007 AEST (ABN Newswire) - The following transcript contains a briefing with Gary Cohen, Chairman and CEO of IBA Health Limited (ASX: IBA).
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IBA Health Limited received final UK court approvals for its acquisition of iSOFT PLC on the October 30, effectively completing the transaction. What are the immediate implications of the acquisition for IBA?
Executive Chairman & CEO Gary Cohen
For us this is a company transforming transaction. It gives us a once-in-a-lifetime opportunity - driven by our health domain expertise, our state-of-theart technology and the extraordinary pool of talent across the expanded business - to create a world-class company delivering healthcare IT innovations globally.
It's taken us over 12 months to achieve this; we now know a lot more about iSOFT, its staff and technology and we're confident we have the joint assets to make a significant difference to the way health IT is delivered. We see enormous synergy between our two companies' products and technology, and our markets are geographically complementary. Combined, our products are being implemented by leading healthcare providers in over 35 countries. And together, our centres of excellence in India, our regional centres, and our team of over 3,500 health and IT professionals will continue to develop these products to provide advanced, adaptable and cost effective IT platforms that will assist healthcare providers globally to deliver efficient and safe care.
At the same time, we'll continue to play a key role in the ground-breaking UK National Programme for IT (NPfIT) by delivering iSOFT's LORENZO health IT platform under a contract that covers three-fifths of the National Health Service (NHS) in England.
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What's the advantage as a healthcare IT provider of having a broader geographical footprint when to date the major players in the sector have been regionally based and major healthcare projects are typically nationally or statebased?
Executive Chairman & CEO Gary Cohen
Increasingly the major opportunities in the healthcare market are based around large, national, state, and province-wide procurements and implementations. These large procurers look at the strength of the provider's balance sheet along with its international experience.
To compete in these markets we needed to grow, and grow internationally. Over the last four years we've successfully done this from our base in Australia, primarily in Asia. However, we couldn't ignore the opportunity, through the acquisition of iSOFT, of accelerating this growth and acquiring a portfolio of quality European clients.
The health IT market is very much a "show me" market. The ability to point to multi-state and province-wide implementations of our technology is key to our ability to compete in the international market.
We now have one of the world's largest specialist health IT capabilities which we'll use to cost effectively develop, deploy and support health IT platforms for the global markets. Our production efficiency and the economies of scale available in the global market will ensure we can deliver product at increasing margins.
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IBA's revised cash offer of GBP0.69 valued iSOFT at GBP166 million (A$411 million), a 19 percent premium to your original all-share offer. What financial metrics did you consider to justify the higher valuation of iSOFT?
Executive Chairman & CEO Gary Cohen
At the time of our first bid, we were the only serious player in the ring. Whilst we originally contemplated a higher bid, we didn't feel at that stage compelled to go to a higher level.
However, when CompuGROUP came in with an 11th hour bid, we went back to our initial views on valuation. We've always maintained we'd only make a bid that was earnings enhancing. The stable revenue base, the estimated cost synergies of A$27 million by 2009, the scale of the enlarged company and its international peer ratings helped us decide that an acquisition at the revised price would add value to our shareholders both in the short and longer term.
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IBA's offer also had a share alternative. What has been the level of take-up of IBA shares by iSOFT shareholders?
Executive Chairman & CEO Gary Cohen
Elections were made under the share alternative in respect of 39.1 million shares. This represents over 16 percent of iSOFT shares held by European and international shareholders and is a strong vote of confidence for our integration and growth plan.
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IBA employs 700 healthcare and IT professionals and had revenue A$75 million in the June 2007 year, whereas iSOFT employs more than 2,600 professionals and had revenue of GBP175 million (A$434 million) in the year to March 2007. Given the larger scale of iSOFT, how do you plan to integrate it and what are the risks?
Executive Chairman & CEO Gary Cohen
We've formed an internal integration team which is overseen by a board committee. Before completion of the acquisition we put together a 100-day integration plan with key milestones around the first 30, 60 and 100 days. We've also replaced some of iSOFT's senior management with our own team to ensure we can implement our plan effectively. We've co-located some of our executives in the UK and India and I plan to spend a considerable amount of my time in the UK during the first 12 months.
I've already visited all our operations and interviewed all the management teams. We've agreed various targets - revenue growth, savings, HR, product and so on. I'm confident the people side of the integration will be fine. The company is thirsty for change and looking for leadership to drive growth - I'm sure our integration will answer these needs.
We've already started realising savings against our plan, so achieving our savings target should be quite achievable. Nevertheless, we'll have to make some investment in infrastructure and people to get growth in the right areas.
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What will be the main steps in integrating iSOFT and what progress has been made?
Executive Chairman & CEO Gary Cohen
Since the announcement of the merger our combined teams have been working to ensure the rapid integration of the two organisations. We have a re-branding process underway and we've made significant progress on the integration in many areas.
We've announced our new organisation structure and implemented many of our planned senior management changes. These include a number of redundancies in the senior iSOFT management team, the appointment of a Group Finance Director (Acting) located in Sydney and a Group Operations Director (Acting) located in the UK, combining the expanded group's three Indian operations under our Indian MD and basing our product management in Chennai under our Chief Technology Officer (CTO), Dr Brian Cohen.
We've started to integrate iSOFT's Australian and New Zealand operations with ours and to integrate the finance functions of the group. We've also initiated commercial discussions with CSC, the contractor we're delivering LORENZO to under the NPfIT, to place the relationship on a more balanced footing.
On the savings side, the cost of maintaining iSOFT's London Stock Exchange trading registration has been eliminated.
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IBA had previously forecast that the merger with iSOFT would generate cost synergies of A$27 million per annum in the June 2009 financial year. How will the synergies be realised and given the delay in the transaction, is the timing still achievable?
Executive Chairman & CEO Gary Cohen
As I said earlier, we're already starting to realise the cost synergies. They come from three main areas: head office and our operations in Australia-New Zealand and India. We've already moved iSOFT's head office to Sydney and most of iSOFT's head office personnel have left or are in the process of transitioning out. The Australia-New Zealand integration is well underway and will be complete by the end of next month. The Indian integration is also underway and will be completed within three months.
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When do you expect to be in a position to provide guidance on the earnings of the expanded group in the current year ending June 2008 and going forward?
Executive Chairman & CEO Gary Cohen
We expect to be in a position to report an integrated budget with our half-year results announcement in February 2008.
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Thank you Gary.
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Contact
IBA Health
Gary Cohen or Greg King
TEL: +61-2-8251-6700
www.ibahealth.com
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