Dreyfus agrees to takeover by Mellon Bank

DREYFUS Corporation, the mutual fund management group, has agreed to a friendly takeover by the Pittsburgh- based Mellon Bank in a stock- swap transaction that values Dreyfus at dollars 1.85bn.

The deal reflects the growing interest among US banks in generating fee income by marketing a full range of financial services. Dreyfus manages dollars 80bn worth of assets through its equity, bond and money market funds.

Dreyfus is the sixth-largest mutual fund management company in the US, while Mellon is the 21st-largest bank ranked by assets.

Dreyfus shareholders will receive payment in the form of 0.88017 Mellon shares for each of their Dreyfus shares, and the stock-swap structure will enable them to escape tax. At the Mellon closing price of dollars 57.375 on Friday, the offer would be worth dollars 1.85bn.

Mellon shares were suspended yesterday morning as the market was given time to digest the news.

The bank intends to take a charge of dollars 73m after tax for integration expenses once the deal, which requires both shareholder and regulatory approval, is closed. The company said this was likely to be at some point in the middle of next year.

Frank Cahouet, Mellon's chairman, said that the merged companies would be well positioned 'to meet the public's growing desire for a complete array of high-quality financial products delivered by a single source'.

The two companies said Dreyfus would retain its headquarters in New York City, and remain a free-standing organisation within the Mellon group. The well-known Dreyfus name is to be retained for the mutual funds under its management.