Thomas Vale chairman Mike Wallis is to chair the new company, ICS-Vale, with Industrial Contract Services chief executive Geoff Meadows as managing director.
Wallis said the aim of the merger was to build the businesses into a major national FM and contracting force.
Both firms have converted their equity into shares in the new private company. Venture capitalist 3i, which backed Thomas Vale's management buyout from former owner Metsec in 1992, has provided a further £7.8m to help start the company.
"The cash injection will be used to further expand the business," Wallis said.
"The worst thing you can have in construction is under-capitalisation. We wanted a strong balance sheet when we started off." A stock market flotation is also planned for the new firm.
"What we would like to do is get ourselves in a position to float within three to five years' time with a market capitalisation of at least £50m. Any less than that is a waste of time," Wallis said.
At the moment, Industrial Contract Services concentrates on FM and contracting in the South-east, where its biggest client is Ford. Other blue-chip clients include SmithKline Beecham and British Aerospace.
Wallis said the attraction of the deal for Industrial Contract Services was the chance to expand its customer base and to get a foothold in the Midlands.
The deal will reduce Thomas Vale's dependence on its Midlands base and allow it to move quickly into the FM market.
Wallis said: "It's a quantum leap forward for us. These guys have been doing facilities management in one form or another for 25 years. It is a whole new skills set for us." He said the new firm is large enough to target private finance initiative work, which Thomas Vale did not have the resources to do on its own.
"Having FM skills on board is enormously helpful for PFI work," Wallis added.
ICS-Vale is expecting to increase its turnover to £100m in its first operational year.
Wallis said the two companies met through a broker in December 1997 and have been in talks since.
"It's been a long courtship, but that's no bad thing. We are going into it knowing a lot about each other." Thomas Vale had a turnover of £43m last year, and Industrial Contract Services had sales of £42m.
