The reported counterbid for DuPont (DD) by a German competitor has raised concerns for a number of Dow Chemical (DOW) shareholders.
But investors should rest easy, analysts say.
Jim Cramer and Action Alerts PLUS co-manager Jack Mohr wrote in a Monday report that the proposed Dow-DuPont tie-up is still likely to cross the finish line this year.
German chemical producer BASF (BASFY) approached DuPont as a potential suitor, Bloomberg reported Friday.
"While this has caught the headlines, we view this as mere noise and fully expect DuPont's merger with Dow Chemical to close as planned later this year," they wrote in the report. "Quite simply, we do not believe the deal makes any sense ¿ strategically or financially ¿ for either party." (Dow Chemical is among the holdings in the charitable trust.)
One reason to be confident in the merger is that there has been little regulatory opposition, with "no surprises" arising so far from conversations with the U.S. Department of Justice, according to the report.
Nomura analyst Aleksey Yefremov echoed that sentiment in a Monday investment note.
"We view an alternative bid ¿ if it materializes ¿ as a modest negative for DOW but see many obstacles facing BASF in such a hypothetical bid," he said. "Importantly, we see attractive standalone prospects for DOW even if the DOW/DD transaction falls through (an unlikely scenario, in our view)."
Nomura maintains a Buy rating on Dow Chemical and a $58 price target.
Meanwhile, analysts at Wells Fargo view the Dow-DuPont combination as a "merger of equals," and see Dow representing a discount opportunity at current prices.
"The European filings are on track and no material divestitures are expected to be required," analysts Frank Mitsch and Rory Blake wrote. "Domestically, farmers have been supportive of the deal as the combined company will provide enhanced offerings and a crucial second technology leader. Latin America is of some concern as the combined seed footprint could be critically viewed, and DOW has yet to hear back from the authorities."
Wells Fargo has an Outperform rating on Dow.