The purchase will result in the creation of the world’s biggest cement maker with combined sales of more than €32 billion. Under the terms of the deal, Lafarge shareholders will receive one Holcim share for each Lafarge share they own.
In order to ease competition concerns surrounding the deal the two companies have agreed to sell various assets. The companies forecast total annual savings from joining forces to be around €1.4 billion. The combined firm will be based in Switzerland.
"The new group will offer higher growth and low risk, thus creating more value," said Lafarge chief executive, Bruno Lafont, who will become chief of LafargeHolcim.
While the two firms have until now had overlapping operations in Europe, Lafarge has built up a strong presence in Africa and the Middle East, areas in which Holcim is almost absent. For its part Holcim remains uncontested by its French peer in Latin America.
One of the hopes of the two companies is that their merger will help both to cope with higher energy prices and weaker demand that have hurt the sector since the financial crisis.