Shareholders are about to vote, how does Wall Street view Dick's Sporting Goods, Inc. (DKS.US) acquiring Foot Locker, Inc. (FL.US)?

Dick's Sporting Goods, Inc. (DKS.US) acquisition of Foot Locker, Inc. (FL.US) marks the merger of the largest sporting goods retailer in the United States with the leading specialty footwear chain in the United States. According to reports in May, the merger terms show that Dick's Sporting Goods, Inc. will acquire Foot Locker, Inc. for $2.4 billion. This allows Foot Locker, Inc. shareholders to choose between receiving $24 in cash or 0.1168 shares of Dick's Sporting Goods, Inc. for each share of Foot Locker, Inc. stock they own. The funding for this transaction will come from existing cash and new debt. The transaction is expected to be approved by shareholders on August 22, and receive further regulatory approval. The structure of the deal allows Foot Locker, Inc. to continue to exist as a wholly owned subsidiary of Dick's Sporting Goods, Inc. Both brands plan to maintain their respective store operating models, and Dick's Sporting Goods, Inc. will not immediately seek international expansion. The merged company will have strong negotiating power to compete with footwear giants, especially NIKE, Inc. Class B (NKE.US), as its products account for 30% to 35% of sales in both retailers. Analysts have mixed opinions on this merger. Bank of America Corp analyst Robert Ohmes believes that Foot Locker, Inc. will benefit from Dick's Sporting Goods, Inc.'s omni-channel infrastructure, brand display methods, and higher clearance profit margins. Ohmes said, "We expect this acquisition to strengthen brand collaboration, and given its global business footprint, we expect the penetration rate of the post-merger NIKE, Inc. Class B brand (approximately 38%) to potentially return to levels prior to 2019 (based on post-merger data). TD Cowen analyst John Kernan, however, calls this deal a "strategic mistake," pointing out Foot Locker, Inc.'s long-term downward trend and the integration challenges currently facing Dick's Sporting Goods, Inc. UBS Group AG's Michael Lasser highlighted the historical difficulty of retail industry consolidation, but also noted that at the core of this massive deal, Dick's Sporting Goods, Inc. is trying to enter the footwear business. Lasser wrote, "Shoes are the core driver of this category. They are as essential as 'milk' in a grocery store. They have become a symbol of identity. They have technical and supportive functions. In addition, the interaction between employees and customers in sporting goods stores may be more frequent than in other category stores." SA analyst Alan Galecki advised investors to sell Foot Locker, Inc. stock as the cash acquisition offer limits upside potential, and the risk of the deal being canceled or not receiving a higher bid outweighs potential returns. Moretus Research and Eleceed Capital both rated Dick's Sporting Goods, Inc. as a "buy," believing that its performance prior to this merger is promising. In addition to NIKE, Inc. Class B, large sport shoe and apparel companies like Adidas, Under Armour (UAA.US), Deckers Outdoor Corporation (DECK.US), and Skechers U.S.A., Inc. Class A (SKW.US) will also face changes in their store operating models, while sports gear competitors like Academy Sports (ASO.US), Hibbett, and J.D. Sports may face more intense competition in certain product categories.