Analysts say Tarmac and Aggregate Industries have revived bid to create £1.8bn materials giant.
Tarmac and Aggregate Industries have resumed merger talks, city sources claimed this week.

The bid to create a £1.8bn heavy building materials giant called Tarmac Aggregates broke down before Christmas after the firms failed to agree senior roles at the new company.

There is speculation that a management buyout at Tarmac Construction is likely to replace the earlier plan to float the division with a cash injection from the new aggregates firm.

In the war of words that followed the failure of the original deal, Tarmac accused AI of reneging at the last minute. AI countered by accusing Tarmac chief executive Sir Neville Simms of refusing to relinquish control of the business.

Both firms refused to confirm whether they were talking this week.

But one senior city source said: "From all our intelligence sources, we are 99% sure they are back talking and have been since before Christmas. I wouldn't expect an early announcement. They won't come clean this time until they have got a cast-iron deal." He added: "There is a lot of shareholder pressure on both companies to do a deal. They are going to have to be big boys and work it out." Another analyst said: "There has been a lot of talk that they are back in discussions. It wouldn't surprise me to see another deal on the table." Tarmac chairman Sir John Banham held out an olive branch to AI before Christmas. He said: "I personally hope that we will be able to resolve the situation.

"We have agreed now to demerge our construction business. It's not a question of if, but when. It is possible that Aggregate Industries might say 'we need to revisit what some might say are minor issues'.

We are 99% sure they are talking. They won’t come clean this time until they have a cast-iron deal

senior city source

"Out strategy is absolutely plain – to secure shareholders' interests. I believe the possibilities for us to do that are still very much there." Tarmac is under pressure from its major institutional investors, most notably 21% shareholder Phillips & Drew Fund Management, to demerge its construction and aggregates businesses to improve returns.

The main sticking point is the role Sir Neville will play in the new company.

In the original deal, Sir Neville was to step aside to allow AI chief executive Peter Tom to head the new company, but he would have been its non-executive chairman.

The board would have been balanced with two directors each from Tarmac and AI.

Simms was also to have headed up the new company's integration committee, set up to oversee the smooth combination of the firms.