By Al Root

Shares of auto parts supplier Dana are plunging early Thursday after the company announced a transformational deal. Investors aren't giving management much credit.

Dana stock was down 15% at $30.14 in early trading, while the S&P 500 was up 0.6%.

The plunge came after Dana and Eaton announced a plan to combine Eaton's mobility business, which makes drivetrain components for heavy-duty vehicles, among other things, with Dana's existing businesses.

It will create a supplier with $11 billion in sales and $1.7 billion in earnings before interest, taxes, depreciation, and amortization, or EBITDA.

It's a transformational deal for Dana. Eaton is the much larger company. Its market value is roughly $150 billion. Dana's is closer to $4 billion.

Dana shareholders will end up owning 49.9% of the new entity. That doesn't sound like a bad deal. Dana is contributing less than half of the company's Ebitda, based on 2026 estimates. And there should be synergies from the deal, which can boost Ebitda over time.

Still, investors reacted with caution.

There are reasons for that. Barclays analyst Dan Levy pointed out on Thursday that, excluding synergies, Eaton's business is getting a slightly higher valuation than Dana's, but barely. (Auto parts companies don't get big multiples. Before the deal, Dana traded for about 8 times expected Ebitda over the next 12 months.)

What's more, share repurchases will be paused. Investors who like share buybacks don't like it when they go away.

Still, Levy said synergies are achievable, and the combined company is stronger with more aftermarket business. Aftermarket business is generally higher-margin and more stable.

As for Eaton, it is correctly viewed as a supplier of electrical components, benefiting from the AI data center-building boom. Investors aren't likely to be too concerned about the mobility deal. Eaton stock was up 1.1% at $379.73.

Bernstein analyst Chad Dillard wrote that Eaton is now a better business after the combination. He is a fan of the business portfolio management. Dillard rates Eaton shares Buy and has a $534 price target.

Eaton is a stock for industrial investors interested in growth and AI. Dana might become a stock for value investors looking for a deal.

Write to Al Root at allen.root@dowjones.com

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June 11, 2026 11:27 ET (15:27 GMT)

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