Caterpillar Inc. (CAT) announced its plans to acquire a subsidiary of Jinsung T.E.C. Co., Ltd., a South Korea-based manufacturer that specializes in producing undercarriage components for earthmoving and other off-road machinery. The company did not provide the terms of the deal, but said that the acquisition is expected to close in early 2010.

Jinsung T.E.C currently supplies Caterpillar with rollers, idlers and metal-faced seals used on a wide range of Caterpillar machines. The acquisition of its subsidiary, JCS Co., Ltd., will improve Caterpillar’s supply chain and component capacity.

This acquisition supports Caterpillar’s long-term plans of expanding machine capacity in Asia. This acquisition provides Caterpillar with its first manufacturing facility in South Korea. The company already has manufacturing facilities in the other key emerging markets in the Asia-Pacific region — China, India, Indonesia and Australia. The company is focused on growing its customer base in the emerging markets.

Caterpillar sees an improved outlook for 2010. The company said that it is already witnessing growth in China. Asserting its optimistic outlook, the company recently announced plans to increase its machinery prices by 2% effective January 2010.

Though the company expects 2009 sales to decline more than 35% year-over-year, it anticipates an improvement in its top-line in 2010. The company forecasts a 10% to 25% increase in sales for 2010, compared to the midpoint of the 2009 outlook range.

Being a market leader in construction and mining equipment, we believe Caterpillar will benefit immensely from the growing need for infrastructure development in both developed and developing nations.

We have recently upgraded the rating on the stock to Outperform.

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