After Abercrombie & Fitch (ANF) confirmed that it had preliminary talks with several parties regarding a potential deal, RBC Capital analyst Brian Tunick says there is less than a 25% chance of a deal occurring. Among the hurdles are the large declines in the stocks of a number of companies that have bought retailers recently, Abercrombie & Fitch's high overseas exposure, and its "still struggling adult brand," according to the analyst. However, Tunick says there is some strategic rationale for a deal between American Eagle (AEO) and Abercrombie & Fitch. Such a transaction would give the combined company "landlord clout and real estate rationalization control; and "promotional and positioning control over three teen/young adult brands," according to the analyst. He thinks the combined company could generate EPS of about $1.50 by fiscal 2019, but warns that the deal would be dilutive to Abercrombie & Fitch in the nearer term and could erode value as other recent deals in the sector have done. The analyst keeps an Underperform rating on Abercrombie & Fitch and an Outperform rating on American Eagle.