US-based Caterpillar Corp, the world's leading manufacturer of construction and mining equipment, plans to buy a stake with a major Shanghai engine maker, according to informed sources.

Caterpillar has launched due diligence into Shanghai Diesel Engine Co Ltd, which is 50.32 percent owned by Shanghai Electric Group Corp Ltd, one of China's biggest manufacturing conglomerates, said people close to the deal.

Shanghai Diesel yesterday said it is holding discussions with Caterpillar, seeking cooperation in a move to speed up its development, according to a statement the company filed with the Shanghai Stock Exchange. But the talks are at an early stage, and further details were unavailable yesterday.