iSoft and IBA Health, the Aussie firm which has offered to bail out iSoft, have issued a joint statement suggesting they may take legal action against CSC's blocking of the deal.

The rescue bid was approved by iSoft's board of directors in mid-May and offered both a takeover and refinancing package. But earlier this week CSC said it would not approve the deal claiming it was not in the best interest of the National Programme for IT (NPfIT). CSC's contract with iSoft gives it the right to veto any takeover bid for the firm.

Gary Cohen, chief executive of IBA, said: "IBA and iSoft were surprised at the receipt of the letter from CSC in the light of previous discussions which both IBA and iSoft had held with CSC.

"Both IBA and iSoft are seeking urgent further discussions with CSC to resolve any issues and concerns that CSC may have so that CSC can consent to the merger. IBA and iSoft have also been advised that there is a reasonable basis for arguing that CSC has unreasonably withheld and/or delayed its consent. Both IBA and iSoft are considering their rights and what further action to take in the light of this advice."

The boards of both iSoft and IBA support the deal and today repeated their committment to the company's products which play a central role in NPfIT - the massive NHS IT project.

John Weston, chairman of iSoft, said in a joint statement with IBA: "We are seeking urgent clarification from CSC regarding the reasons for the recent changes in their position and are initiating proceedings to ensure that consent is not unlawfully withheld."

CSC's surprise refusal needs to be sorted out fairly quickly. iSoft's financial problems mean it will effectively run out of money in November when existing banking arrangements come to an end.

iSoft's contracts are not with the NHS, but directly with CSC. Depending on the details of the contract between the two it could be that CSC would effectively inherit iSoft's products should the company fail.

IBA and iSoft's statement is here.

CSC said it had nothing to add from the statement it put out on Wednesday. ®