Tarmac swaps houses for roads

TOM STEVENSON

Deputy City Editor

The long-awaited consolidation of the troubled UK building industry was kick-started yesterday by the unexpected announcement that Tarmac is to swap its house-building operation, Britain's second largest, for Wimpey's construction and minerals activities.

The City welcomed the deal, with Tarmac's shares closing 10.5p higher at 93.5p, a 13 per cent rise. Wimpey was marked 15p higher at 127p, a similar increase. Both shares have under-performed sharply over the past year as trading conditions have deteriorated.

Following the deal, Wimpey will dominate the UK new-house market, building an estimated 15,000 houses a year. Joe Dwyer, the company's chief executive, said Wimpey had targeted 20,000 houses a year after expansion of its operations in the US and Australia.

Tarmac becomes Britain's leading road-builder and aggregates producer, generating substantial asset backing for what is expected to be a leading role in the Government's private finance initiative. Industry observers believe the PFI will be dominated by large, financially strong companies.

Both companies described the asset swap, which puts a value of about pounds 320m on Tarmac's housing operation, as a "win-win situation". Tarmac signalled in August that it planned to withdraw from house building, but yesterday's deal confirmed that neither company could continue to fund expansion of a range of businesses and would need to focus on only one of their existing divisions.

By swapping assets in this way, the companies avoid accepting a discount to underlying value in the disposal ofunwanted divisions, and the need to pay a premium when the funds raised are reinvested.

Neville Simms, Tarmac's chief executive, said the deal answered criticisms levelled in August that the sale of housing would fail to achieve asset value, that Tarmac would be unable to reinvest the funds effectively and that earnings per share would be diluted. The deal was confirmation of his confidence in the long-term future of the construction industry, which has been plagued by overcapacity and low demand.

Analysts welcomed the deal but some expressed concern over the large cash demands Wimpey would face running a house-building company with a land-bank of more than 30,000 plots. Mr Dwyer expected to spend in excess of pounds 200m a year simply replacing the land consumed by new houses.

Wimpey estimates that it will control about 10 per cent of the UK's new- build housing market following the merger. Barratt and Beazer, the next largest rivals, have market shares of only about 4 per cent.

Start your day with The Independent, sign up for daily news emails
News
The guide, since withdrawn, used illustrations and text to help people understand the court process (Getty)
newsMinistry of Justice gets law 'terribly wrong' in its guide to courts
News
Bobbi Kristina Brown with her mother Whitney Houston in 2011
people
News
Starting the day with a three-egg omelette could make people more charitable, according to new research
scienceFeed someone a big omelette, and they may give twice as much, thanks to a compound in the eggs
News
Top Gun actor Val Kilmer lost his small claims court battle in Van Nuys with the landlord of his Malibu mansion to get back his deposit after wallpapering over the kitchen cabinets
people
PROMOTED VIDEO
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
newsPatrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
News
Robert Fraser, aka Groovy Bob
peopleA new show honours Robert Fraser, one of the era's forgotten players
Life and Style
Torsten Sherwood's Noook is a simple construction toy for creating mini-architecture
tech
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
News
i100
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links