Westpac has agreed to buy the RAMS franchise network for $140 million in cash. This figure will cover over 90 RAMS Home Loan Centres but Westpac is not acquiring the company itself or its current mortgage book.
David Morgan, CEO of Westpac, said that this acquisition will extend their distribution footprint and fits in well with Westpac's existing growth plans. In addition, Westpac will provide up to $2billion in finance to allow RAMS to refinance their current debt arrangements which have been hit by the US mortgage crisis. RAMS has $6billion of short-term debt that it is currently attempting to refinance.
The sale of the franchise business is subject to approval by RAMS shareholders in November, with the deal expected to be completed by January. The RAMS directors unanimously recommended the deal to shareholders and will be voting accordingly. RAMS staff will be retained by Westpac and it is believed there will be no change for existing customers. The deal will, however, expand Westpac's existing Australian retail mortgages business.
In early trade on the ASX, RAMS shares were down 13 cents to 71 cents and Westpac shares were up 77 cents to $29.24. Under the deal, RAMS will remain listed on the ASX. For more information on Westpac and their mortgage offerings, please visit our Westpac information page.