Japan duo in $3.8bn cosmetics deal
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A merger between Kanebo and Kao would put pressure on Japan's market leader, Shiseido.
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TOKYO, Japan (Reuters) -- Kao Corp, Japan's biggest household products maker, will spend more than 400 billion yen ($3.78 billion) to buy Kanebo Ltd's cosmetics operations, according to Japanese press reports.
It would be the largest deal yet between non-financial firms in Japan, the Nihon Keizai Shimbun reported at the weekend.
Kao would become Japan's second-largest cosmetics maker after Shiseido Co Ltd, around mid-February, the paper said.
Kao and Kanebo announced last October they would integrate their cosmetics operations under a new company by March 2007, but they have twice delayed signing a deal.
The newspaper said differences in their corporate cultures became obvious through the course of the negotiations, prompting a change of plans.
Kao will now set up a new company that will obtain the trademark rights to the Kanebo brand, Kanebo's sales network and the 9,300 cosmetics operations workers.
Kao and Kanebo issued a joint statement Saturday, saying they were in talks on a scheme in which Kanebo will sell its cosmetics operations to Kao for an undisclosed sum.
The statement said it would take a while before the two firms could strike a final deal.
Officials for the two companies declined to give more details.
The Nikkei report that Kao would spend 400 billion yen to buy Kanebo's cosmetics operations was "a speculation", a spokesman said.
Kao, the maker of Biore skin cleanser and the Sofina cosmetics series, and Kanebo, which makes high-end cosmetics, want to reinforce their development and marketing capabilities in Japan and speed up their overseas expansion.
Analysts say Kanebo's domestic network appears to be an attractive choice for Kao which is keen to strengthen its sales network for cosmetics products.
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