Tarmac and Aggregate on track for pounds 1.8bn merger
However, Tarmac yesterday denied suggestions that a deal could be announced this week and said it was in talks with a number of the industry's key players.
A link-up between Tarmac and Aggregate would create a quarrying company big enough to rival established leaders such as Hanson, RMC and other international groups. Aggregate, based in Leicestershire, confirmed it was in talks with its Wolverhampton-based rival in October.
A central feature of the talks has been the future of Tarmac's construction division. It is thought that this division may now be de-merged into a separate company with a cash injection of pounds 100m-pounds 150m.
The division accounts for half of Tarmac's sales but only 20 per cent of profits. It is a complex business with a large number of contracts.
It is thought that the de-merged construction businesses will be run by Tarmac chief executive Neville Simms. Aggregate's chief executive Peter Tom would take the same role at the enlarged group.
The City believes the combined group might run into problems with the regulatory authorities because it would dominate the quarrying industry in the Midlands and the market for coated stones such as asphalt.
In recent weeks, Irish rival CRH and Amec are both thought to have put in bids for Tarmac, which has seen its share price dragged down by its construction business.
Shares in both companies soared in October when it was first reported they were in talks. Aggregate has jumped from 56.5p to 70.25p while Tarmac has improved from 80p to 110p.
The merger is expected to save costs by cutting corporate overheads and merging the two distribution networks.
Woolwich terror attack: Suspect Michael Adebowale saw friend 'literally sliced to pieces' in 2008
Emergency landing at Heathrow sparks further controversy over London airport capacity
Unrest may spread across Europe, warns Red Cross chief
BNP and EDL accused of attempt to fuel racial hatred after Woolwich terror attack
You want to get an Eton scholarship? All you need to do is answer four (not so simple) questions
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Nook is donating eReaders to volunteers at high-need schools and participating in exclusive events throughout the campaign.
Get the latest on The Evening Standard's campaign to get London's children reading.
Win anything from gadgets to five-star holidays on our competitions and offers page.