RAMS shares slashed after Westpac offer

Shares in non-bank lender RAMS closed at 48 cents yesterday, a drop of 18 cents or 27 per cent. Investors abandoned the stock as they realised the full impact of the Westpac “rescue” deal in which the bank paid $140 million for the RAMS franchise business and distribution network. A Merrill Lynch analyst, Andrew Lyons, valued the Westpac offer at 40 cents a share but believes that it is worth 65 cents a share. He said that the remaining RAMS loan business, which sees the lender with a $14.5 billion loan book in “run-off” mode, is worth around 55 cents a share or $231 million, and that a counter-bid is not out of the question. However this is complicated by the other two parts of the offer in which Westpac will provide $500 million to enable RAMS brokers to continue trading between 15 November and January next year when the deal is completed, and provision of $1.5 billion towards refinancing $6 billion of the lender's funding. RAMS executives have said that without Westpac's assistance they faced closing their doors to new business.