Kao Corp. and Kanebo Ltd. said Thursday they have agreed to integrate their cosmetics businesses by the end of March 2007.

Under the agreement, Kanebo, Japan’s second-biggest cosmetics maker after Shiseido Co., will set up a new company by the end of March 2004 by spinning off its cosmetics operations and related subsidiaries, the two companies said.

Kao, which is the nation’s top maker of household products and is known for its Sofina brand cosmetic products, will spin off its cosmetic business into the new company by the end of March 2007 and take a 49 percent stake in the new firm, they said in a joint release.

Kao is currently the fourth-largest cosmetic maker in Japan.

Toiletry products such as shampoos will not be covered by the planned integration, the two companies said.

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