Following yesterday’s announcement that System C Healthcare was in talks with a potential suitor (see System C shares soar on bid talks), shareholders didn’t have to “sit tight” long for an update. This morning, the company has confirmed that US healthcare giant McKesson – via a newly formed subsidiary McKesson UK – has made a cash offer for System C. The offer of 70 pence per share values System C at £87 million and represents a 50.5% premium over the closing price on Monday (the day before the offer talks were announced).

McKesson is already a top ten ranking player in the UK healthcare market (see UK healthcare supplier IT landscape 2010), with revenues totalling about £90 million from the sector. Having entered the UK healthcare market in 1999, it has a strong track record. In particular, it has benefited from a major Electronic Staff Records project to develop a centralised national HR system for the NHS in England & Wales, and a growing outsourced HR and payroll IT shared services business for the NHS.

However, McKesson’s indecision over its approach to the UK healthcare application market has put it at a disadvantage. The company has a legacy hospital Patient Administration System (PAS) business, but following the appointment of iSoft and Cerner to provide PAS systems under the National Programme for IT (NPfIT), the company decided to pull out of the PAS market. In hindsight (it’s a wonderful thing!), the decision was the wrong one, as the Department of Health’s decision to release NHS Trusts from their central procurement obligations has now opened up the market for other vendors to provide PAS and clinical systems. McKesson has a modern product built for the US market (its Paragon Hospital Information system) and, we understand, the intention was to tailor the system for the UK market. However, it appears that McKesson’s management team have seen an opportunity to acquire a new, technically advanced, PAS system, by bringing System C on board.