Mitsui Chemicals Inc. and Takeda Chemical Industries Ltd. said Wednesday that they have agreed to set up a joint venture by integrating their urethane chemicals and urethane composite materials businesses.

The new company, Mitsui Takeda Chemicals Inc., whose head office will be located in Tokyo's Chiyoda Ward, is scheduled to begin operations in April 2001, employing a staff of 1,000 -- 600 employees from Takeda Chemical and 400 from Mitsui Chemicals -- and using some of the production lines, sales offices and research facilities of the two chemical makers.

It will be capitalized at 40 billion yen, with Mitsui Chemicals holding a 51 percent stake and Takeda Chemical owning the rest. But Mitsui Chemicals plans to purchase Takeda Chemical's stake in the new firm in 2006, officials of the two companies said.

The new company is expected to earn 110 billion yen in sales in fiscal 2001 and 130 billion yen in fiscal 2005. It plans to build a new production facility in Japan by the end of 2003 to expand production capability of tolyllen diisocyanate, a kind of urethane material, they said.

Urethane chemicals and composite materials are used in various products including cushions for automobile passenger seats and sofas and insulation materials for refrigerators and houses.

Mitsui Chemical President Hiroyuki Nakanishi said although U.S. and European chemical makers have been advancing rapidly into the growing Asian market, the new company will become a leading urethane maker in the region.