Caterpillar Buys Japanese Distributor - Analyst Blog

By Zacks Equity Research,

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In yet another effort to enhance its business in Japan, Caterpillar Inc.  ( CAT ) announced that Caterpillar Japan Ltd. has acquired Caterpillar Tohoku Ltd. Caterpillar Tohuku's 400 employees and its three subsidiaries will now come under Caterpillar Japan.

Cat Tohoku was independently owned and operated for more than four decades. It provides sales, rental, service and aftermarket support for Caterpillar machines in the Aomori, Iwate, Miyagi, Akita, Yamagata and Fukushima territories.

The acquisition will help Caterpillar Japan in restructuring its distribution network in Japan. This will enable the company to better service its customers, providing them with its wide range of products, services and solutions. Cat Tohoku's strong customer base and alignment with Caterpillar's other dealers across Japan will help Caterpillar better serve its customers in the Tohoku territory which was ravaged by earthquake and tsunami.

This comes a day after Caterpillar's announcement that it will become the sole owner of Caterpillar Japan Ltd, its 50-50 joint venture with Mitsubishi Heavy Industries, 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.

Japan is an important market for Caterpillar and plays a key role in the company's efforts to become the market leader in the Asia-Pacific region. Japan's economy had suffered mainly due to the natural disasters last year. The company believes rebuilding efforts post tsunami and more expansionary central bank policies will likely lead to about 3.5% economic growth in Japan in 2012.

We believe Caterpillar's expansion plans of opening new facilities and furthering existing operations, particularly in the 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  ( CNH ),  Komatsu Ltd .  ( KMTUY ) and  Volvo AB  ( VOLVY ).

CATERPILLAR INC ( CAT ): Free Stock Analysis Report
CNH GLOBAL NV ( CNH ): Free Stock Analysis Report
VOLVO AB ADR B ( VOLVY ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CAT , CNH , VOLVY

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