Dana (DAN) proposed merger with Eaton's (ETN) Mobility unit is a "transformative deal" that boosts its exposure to a more attractive commercial vehicle market and aftermarket business, RBC Capital Markets said in a note emailed Friday.

Dana believes that it can cut redundant overhead costs in both light vehicle and commercial vehicle segments on a regional basis, RBC analysts said. Purchasing was also mentioned as a significant source of cost savings, as the Eaton Mobility unit has more purchasing synergies with Dana compared with the broader Eaton portfolio, the analysts noted.

Dana's recent 12% stock price drop has more to do with the deal dynamics of the merger rather than its fundamentals, according to the note.

The company's shares may be range-bound in the short term, given that the deal's Reverse Morris Trust dynamics means Dana cannot buy back stock for 24 months, the analysts said. However, they said they expect shares to recover in the longer term.

RBC maintained the company's stock rating at outperform and price target at $41.

Price: 30.40, Change: +0.29, Percent Change: +0.96