RAMS Home Loans Group (RHS) announced this morning that it has completed the sale of its brand and distribution business to Westpac Banking Corporation (WBC).
Westpac paid a bargain $140 million for the group's franchise business, which was approved by RAMS shareholders in October 2007.
RAMS will retain its existing mortgage book under the deal.
Westpac CEO David Morgan said the acquisition of the home loans group will provide the bank with another growth option in its retail banking business.
"The RAMS franchisee model has been successful and this transaction ensures that it can continue," Mr Morgan said.
"Not only have we increased our distribution network by over 10%, we will invest in the entrepreneurial talent at RAMS to ensure it remains an aggressive market player."
RAMS, which listed in July 2007, has been one of Australia's highest profile victims of the US subprime mortgage crisis.
In August last year it fell into trouble when global liquidity pressure prevented it from refinancing $6.17 billion of debt sourced from the US extendable commercial paper (XCP) short term credit market.
As part of the transaction, Westpac said it has funded RAMS mortgages that settled from November 16th 2007 to today and has agreed to participate in the refinancing of its extendable commercial paper program at expiry in the first quarter.
RAMS has until February 11 to roll over two XCP programs worth $5.5 billion, and has already flagged that the higher costs it faces to secure the refinancing will have a material negative impact on its fiscal 2008 earnings forecasts.
From Friday, RAMS Home Loans Group will be renamed RHG and former RAMS treasurer Glenn Goddard has now replaced outgoing chief executive Greg Kolivos.
At 12:30PM AEST, RAMS shares were up by 1 cent to 31 cents and Westpac had gained 2 cents at $27.61.
