merryl lynch expects counter offers, page-2

Here is the article appeared on The Age

Don't rule out rival RAMS bid: Merrill

October 3, 2007 - 10:35AM

A counter-bid for the franchise network of RAMS Home Loans Ltd should not be ruled out, according to analysts at Merrill Lynch.

Westpac offered $140 million on Tuesday for the franchise network of the troubled non-bank lender.

Amongst terms of its offer, RAMS entered into "no-shop" and "no talk" agreements, basically meaning it can't actively seek other offers.

According to analysts at Merrill, Westpac paid about 40 cents per RAMS share for the franchise network.

"Prior to (Tuesday's) announcement we had attributed 65 cents of value to RAMS franchise going forward," analysts Andrew Lyons, Matthew Davison and Nicole Mehalski said in a note to clients.

"Therefore, while RAMS is subject to `no-shop' and `no-talk' provisions in its agreement with Westpac, we could not rule out another counter bid for the RAMS franchise.

The deal with Westpac mean Australia's fourth largest bank will pick up RAMS future business, but RAMS' existing $14.5 billion loan book will stay with RAMS.

Merrill Lynch has valued the existing loan book at 55 cents a share.

"Taking into account corporate debt and the fact Westpac is acquiring the future trail commissions for RAMS' franchise network, we estimate the deal implies RAMS' stock is currently worth 69 cents," the analysts said.

RAMS shares closed on Tuesday at 66 cents.