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MELLON MAY BE RIPE FOR PICKING

Unlikely or not, there's a new name on the short list of takeover targets: Mellon Bank (MEL), the 22nd-largest U.S. bank holding company.

Suitors, say the takeover pros, include NationsBank, Chase Manhattan, First Union, Northern Trust, and Bank of New York. ''The talking point in terms of price is 55 a share,'' says one shareholder, but he thinks Mellon will consider no offer less than 60. Mellon stock hit 457/8 on June 13 and is hovering at that level.

When Mellon Bank acquired Dreyfus in August, 1994, it set itself apart from most other banks. It became the No.1 bank manager of mutual funds and one of the biggest investment-management firms, with $233 billion in managed assets. ''It's not just a bank anymore,'' says one New York money manager, who has been accumulating shares. ''It has become a major asset manager--which is what many other major banks are scrambling to be,'' he adds. So despite its $12 billion market capitalization, he says Mellon is tempting buyout bait. Mellon acquired asset manager Boston Co. in May, 1993.

PaineWebber banking analyst Ruchi Madan, who also says Mellon is an alluring target, notes that the asset-management business had a good year in 1996. ''Dreyfus is gaining momentum,'' Madan notes. It had been a sluggish mutual-fund operator for years before Mellon bought it. She recalls that Dreyfus had 55% of assets invested in lower-fee-paying money-market funds and 30% in fixed-income funds. Since the acquisition, Dreyfus has improved the investment mix in favor of the higher-fee-paying stock funds. Dreyfus' equity assets jumped to $15.7 billion in this year's first quarter, up from $12.9 billion a year ago--a 22% rise.

Also fueling buyout speculation: Mellon CEO Frank Cahouet's contract expires at the end of 1998, and no successor has been named. Moreover, Mellon's retail and corporate banking sides continue to report slow growth, she notes. That offers potential buyers a chance to spruce up that part of the bank, for even better returns. Mellon and the purported suitors declined comment.




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Updated June 23, 1997 by bwwebmaster
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