Shareholders in Rams Home Loans group who have been gutsy enough to hang onto their shares are entitled to feel a bit miffed about the way they have been stiffed by gutless management and founder John Kinghorn, who not only sold them an overpriced, over-hyped business back in July, but has now turned around and sold them down the drain to Westpac in a cheap, opportunistic deal.

Kinghorn got over $600 million from the float and hangs onto it, the shareholders have lost heavily, and Westpac has screwed a great deal out of the floundering carcass of Rams

But if you look at the sharemarket reaction, another view can be mounted: that Rams is dying and it’s a case of everyone for themselves, with 206 million of the 353 million shares traded since the Westpac deal was announced on Tuesday.

The shares fell heavily on both days to end at 48c yesterday, which valued Rams at just over $169 million: seeing Westpac is paying $140 million for the name and outlets (or 40c a share), that puts a value of 8c on the income streams and value of the $14.5 billion in existing mortgages remaining with Rams. They were off another cent this morning at 47c just after the opening.

Merrill Lynch values that mortgage pool at 55c a share (and the whole company around 69c a share), so according to the market the mortgages have a value of 7c a share or so, based on the Merrill’s figures.

But someone or some people must see value in Rams: after all there have been buyers for those 206 million shares sold and they could be getting the rump of Rams for next to nothing. If the shares sink to around 40c today then the mortgages have no value whatsoever, which is rubbish.

Kinghorn and UBS sold Rams in late at $2.50 a share and they were pummeled in August when it couldn’t refinance $6.17 billion of short term commercial paper here or in the US or European markets because of the credit freeze.

It’s a damaged brand and if the company was in administration, there would be bidders looking for the mortgages, rather than the brand name of the outlets, which would have very little value. So Westpac has gone Vulturing (screwing a hard nosed deal out of a company that couldn’t really resist).

To support his actions, Kinghorn does a patsy interview with the Australian Financial Review (and no one else) where he claimed Rams was a case of ‘sell or shut the door’. He says it’s not a great outcome for shareholders and they have at least got something.

That might be the case, but did he and the company sell to the first bank that wandered buy, or was there an auction and this was the best they could get? There has been no mention of any attempt to drum up an auction or maximise the price.

Therefore the shareholders should be asking if the board flogged the brand name and franchises too cheaply and would be entitled to ask at the special meeting of shareholders, if there were other bids for the company.

The deal allowed RAMS to yesterday finally price a $300 million mortgage-backed bond issue: that was originally set down at $250 million. $291 million were sold at a margin of 0.53% over the one month bank bill swap rate.

Westpac controls the company’s fortunes by offering to finance between $1.5 billion and $2 billion of existing debt between now and the shareholder meeting next month.

Merrill Lynch said yesterday that: “While the deal with WBC does increase the probability that RAMS is able to refinance its XCP, the price WBC is paying for the franchise is largely reflected in the current share price and we therefore maintain our Neutral call.

“Prior to today’s announcement we had attributed 65¢ of value to RAMS’ franchise going forward. Therefore, while RAMS is subject to “no-shop” and “no-talk” provisions in its agreement with WBC, we would not rule out another counter bid for the RAMS franchise, ” Merrill Lynch said.

And what about UBS, the investment bank that sold Rams into the market in the last glorious deal before the great credit freeze struck?

Well it told clients yesterday that: “We believe this is an important step for mending WBC’s underinvested retail bank WBC expect the deal to be EPS dilutive in year 1 (<1%) & accretive in yr 2. The transaction values each RAMS store at $1.5m, c15x NPAT of an immature bank branch (100k NPAT); however we see significant upside to this post successful integration. We note that WBC has proven to be a good buyer of assets in the past (BT 2002).”

Not a mention of the value of the deal to Rams shareholders.

UBS worldwide is not in good odour at the moment: billions of dollars of losses, billions of dollars of still dodgy loans on its books, the head of investment banking and the group chief financial officer (Australian, Clive Standish) have been ‘retired’. And of course there’s the ill will the monstering of fund manager Paul Fiani suffered before leaving over his opposition to the opportunistic bid for Qantas: which would have generated fat fees for UBS.

No wonder they don’t want to draw any more attention here to embarrassments like Rams.