Analysts don’t appear to be thrilled with the proposed deal that will see Germany’s Commerzbank AG buying rival Dresdner Bank AG.

On Sunday, Commerzbank announced plans to buy Dresdner Bank a 9.8 billion euros (US$14.3 billion) stock-and-cash deal. Following the deal’s announcement, Fitch Ratings placed both banks’ ratings on Rating Watch Negative.

“Whilst Fitch recognizes the upside potential for the combined entity resulting from a strengthened franchise in the German Mittelstand, corporate and retail segments, the agency considers the merger execution risk as material,” says Michael Steinbarth, director in Fitch’s Financial Institutions Group. “Although Commerzbank has already demonstrated its ability to integrate Eurohypo AG, the integration of Dresdner may prove more challenging, given its size and the tougher operating conditions in recent months.”

The move to RWN for Commerzbank reflects the significant execution risk inherent in a large integration, the challenges in achieving stated cost and revenue synergies in a difficult operating environment and what Fitch considers to be the inherent uncertainties over the future performance of the higher risk portfolios held by Dresdner, the rating agency said.

In a research note, UBS Ltd. said it views the transaction as significantly dilutive throughout 2011. “We think Dresdner is a strong strategic fit for Commerzbank. However, terms appear unappealing and risks remain high,” it says. “We therefore think the stock might be at risk of being ‘dead money’ for a considerable period of time, given adverse operating conditions and a prolonged and risky merger process which looks to leave little room for positive surprises over the next quarters.”