Insider Media Limited

Birmingham-based construction giant Lafarge has joined forces with Anglo American to combine their UK contracting businesses. The joint venture, which will include the Lafarge subsidiaries and Wolverhampton-based Tarmac, is expected to generate recurring synergies of £60m per year.

The joint venture will create a UK construction company comprising London-based Anglo American, Lafarge’s cement, aggregate and concrete subsidiaries and Tarmac.

The combined sales of thee two businesses in 2010 amounted to £1.8bn, with combined EBITDA of £210m.

This combination is expected to deliver substantial recurring synergies of at least £60m per annum. The savings are expected to be generated by increased operational efficiencies, improved logistics and the introduction of value-added products across a wider geographic reach.

Bruno Lafont, chairman and chief executive of Lafarge, said: "This new leading construction materials company, built on the strengths and proud histories of two great teams, will create more value to customers, with an enhanced and larger offer of products and services. For Lafarge, this deal is cash neutral, is accretive to Lafarge shareholders and illustrates our strong commitment to the UK market."

Cynthia Carroll, chief executive of Anglo American, said: "We are excited to be bringing together two high quality and complementary UK businesses to create a compelling new industry proposition through which we expect to unlock significant value. While Anglo American's objective remains to divest its interests in the joint venture over time, this transaction positions us well to maximise value."

The joint venture will operate with its own board of directors led by an independent chairman and executive management teams drawn from both businesses.

Completion of the transaction is conditional upon regulatory approvals. Both Lafarge and Tarmac operations will continue to operate independently until obtaining consent.