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To further strengthen its presence in Asia, Caterpillar Inc. (CAT - Analyst Report) announced that it will become the sole owner of their 50-50 joint venture in Japan, Caterpillar Japan Ltd, for a total deal value of 36.5 billion JPY ($450 million). The takeover is expected to be completed in the second quarter of 2012.

The Japanese alliance goes back more than 45 years when Caterpillar and Mitsubishi formed the joint venture known as Caterpillar Mitsubishi. In 1987, following expansion, the venture was rechristened as Shin Caterpillar Mitsubishi. On completion of the first phase of the redemption plan in 2008, Caterpillar became the majority shareholder in Shin Caterpillar Mitsubishi and the business has henceforth been known as Caterpillar Japan Ltd.

The decision to integrate the Japanese operations into Caterpillar is in line with Caterpillar’s vision of growing its presence in the rapidly expanding emerging markets of Asia and the Commonwealth of Independent States. Full ownership of Caterpillar Japan Ltd will help the company better serve its customers with a broader range of products and services and in turn become a market leader in this region.

Caterpillar’s operations in Japan include major manufacturing centers in Sagami and Akashi. The Sagami unit will be transformed into a high-tech component facility. Akashi mainly manufactures hydraulic excavators and is also Caterpillar’s hydraulic excavator design center, providing the design for Caterpillar’s hydraulic excavator product line globally. Caterpillar also owns several dealers and rental companies that cater to the Japanese markets.   

Caterpillar’s strong brand name, pricing power and global dealer network put it in a vantage position to capitalize on the growing need for infrastructure development worldwide. We believe Caterpillar’s expansion plans of opening new facilities and furthering existing operations, particularly in emerging markets, will boost its long-term potential.

Furthermore, its biggest acquisition to date, Bucyrus, will not only enhance its product line and increase its presence in the emerging markets, but also strengthen its position as the top mining equipment manufacturer in the U.S. As a result, the company currently retains a Zacks #2 Rank on the stock, equivalent to a short-term rating of Buy.

Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base. Caterpillar operates two divisions – Machinery and Power Systems (M&PS) and Financial Products. Caterpillar competes with the likes of CNH Global NV , Komatsu Ltd. (KMTUY) and Volvo AB (VOLVY).

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