Analysts complain of lack of detailed figures, clients worry about loss of materials' ballast.
Details of Tarmac's demerger into construction division "Carillion" and a materials business that will keep the Tarmac name were met with caution by clients – and with undisguised irritation by the City.

The City was unhappy with the quantity of information in Wednesday's announcement. "There has been a major error of judgement with the amount of detail," said one analyst. "We would like a company in these circumstances to show how the two businesses stack up."

Another said: "We are singularly unimpressed. There was supposed to be a detailed breakdown of the full profit and loss account and balance sheet for the new companies, not just the headline figures. People are trying to get a view of whether to pull out or buy."

After the announcement, shares rose 0.25p. "It's hardly a ringing endorsement," said one analyst.

Client reaction was more muted. Mike Abel of Asda said: "Have they done it for the benefit of the client? There's very little chance of that.

Am I excited by the prospect? No, I would be concerned about whether the new firm had the robustness and ability to meet long-term commitments without the sizeable aggregates business behind it.

"I would also want to know that we are dealing with the same people we have built up our partnering relations with. They are a valued contractor to us and we will watch them very closely."

Roger Madelin, chief executive of Argent, said: "We have been kept well briefed over recent months. I am sure they will continue with their good, strong leadership and vision."

Under the terms of the deal, which will cost £25m to carry out, Sir Neville Simms will become chairman of Carillion and Tarmac Group director Roy Harrison will become group chief executive of materials business Tarmac, with Sir John Banham as Tarmac chairman.

Sir Neville said he was happy with his new position, which will combine the roles of chair and chief executive until a chief executive offer is appointed at Carillion's annual general meeting in 2001.

Sir Neville will take a pay cut after leaving his post as chief executive of Tarmac Group, with a new salary of £340 000. However, he will receive a one-off payment of £1.37m.

Analysts believe Sir Neville used the reduced status of his role as a bargaining chip to hammer out what is considered an impressive deal for the construction business. Tarmac will take on the bulk of the construction arm's debt, including £211m in performance bonds.

The new Tarmac will have 11 000 employees and Carillion 14 000. No redundancies are expected. Carillion will have a new reporting structure, intended to make the company more transparent to shareholders and allow benchmarking against competitors.

The new set-up will be:

  • building: responsible for new build, redevelopment and refurbishment, including design and construction management. Turnover is £775m
  • services: comprising facilities management and M&E services and maintenance. Turnover is £288m
  • infrastructure management: road and rail renewal and maintenance activities. Turnover is £257m
  • private finance initiative: all PFI originated revenues and earnings. Turnover is £97m
  • capital projects: overseas regional businesses and all non-PFI civil engineering. Turnover is £534m.
"The deal leaves the construction business in a good position, although it will be much smaller," said one analyst. "They have a great management team in place and are committed to long-term projects where cash flow is more predictable."

News of the shake-up brought further speculation about a bid for Carillion within the weeks running up to listing. "The board would be more receptive at the moment because they could sell it off along with its liabilities," said one analyst.

Sir Neville denied that he had been approached by anyone for the company, but said: "I have been trying to bait the traps for more consolidation in the industry for years. But it takes two to tango and when the tango starts, we will be ready."