NHS software supplier iSoft is starting legal action against its largest customer - Computer Sciences Corporation (CSC) - because it is blocking a proposed merger with Australian software supplier IBA Healthcare.

iSoft, which is developing hospital administration software as part of the National Programme for NHS IT (NPfIT), agreed to a proposed £132m merger last month.

But the takeover requires the approval of CSC, which has contracted iSoft to supply its software for two of the five NHS projects. In August last year CSC guaranteed iSoft a certain amount of business under the NPfIT deals, but also introduced a ‘step-in’ clause that says it can take over software development if iSoft is not performing adequately.

iSoft says CSC previously offered its support for the takeover and has failed to give a satisfactory explanation for changing its intentions.

‘Following detailed discussions over several months, CSC had indicated in writing that, subject to certain conditions, it did not intend to withhold its consent,’ iSoft said in a statement.

CSC says it decided to block the merger because any deal must improve iSoft’s ability to deliver on its obligations and be in the best interests of the NHS.

iSoft says the merger with IBA would put it in a better position to meet its contract with CSC because of increased financial stability. But CSC has indicated that it wants to take a greater role in developing the software, something of which iSoft is wary.

‘iSoft has been advised that there is a reasonable basis for arguing in court that CSC has unreasonably withheld and delayed its consent,’ the statement says. ‘iSoft is also concerned that CSC’s wider interests may be influencing its conduct on this matter.’

It says it will seen to ensure that CSC does not withhold consent on the transaction. It will continue to work with CSC to deliver the NPfIT contract.