The planned £700m merger between Oxfordshire company Torex and its rival iSoft is in doubt after a ruling by the Competition Appeal Tribunal.

The ruling means more uncertainty for Torex employees, because the retail division is likely to be sold if the deal goes ahead.

Torex shares fell sharply last week as investors grew concerned that the merger could be put on ice after the tribunal asked the Office of Fair Trading to review its decision to clear the deal.

Last December Torex opened a new £5m headquarters building in Banbury, employing about 300.

Torex's core market is supplying IT to hospitals and GP surgeries, but it also has a retail division, which employs 150 people in Witney, supplying software for shops such as Argos.

The Witney business was effectively put up for sale earlier this year as Torex said its future would be reviewed by the combined board, despite the fact that building work is going ahead on new offices in Witney.

The Government has put £2.3bn into upgrading NHS IT infrastructure, and both companies are bidding for the first wave of contracts, due to be announced soon. The combined firm would have more than half the market.

The tribunal ruling marks the first time the Office of Fair Trading has been challenged under new rules introduced this summer.

The two companies said they planned to proceed with the merger for now, but the merger could be referred to the Competition Commission.

Torex shareholders had been given until Thursday to accept Isoft's offer, but the deadline is expected to be extended.

Torex shares have lost more than 9.4 per cent of their value since last Wednesday's ruling.

It followed an appeal lodged by an Australian software rival, IBA Health.