TARMAC IS dumping its contracting division because it undermines the Stock Market value of its materials business.
On Tuesday it announced plans to split the business into two independently listed companies with separate managements.
Analysts said the move would boost the value of the materials operation and enable shareholders to profit from an expected surge in the division's value once it is free of the contracting operation.
It is felt that the weakness of the contracting group meant that Tarmac shares have been trading at about 20p below their true value.
Plans to split the two operations follow the collapse of merger talks with Aggregate Industries just before Christmas.
It is widely thought that the deal failed because AI was only interested in the materials arm of the business and was concerned about possible unforeseen liabilities taken on by the contracting operation.
'The contracting division is seen as a poison pill,' said one analyst. After the split 'the construction division will be left floundering', he added.
Under demerger proposals Tarmac said that it would seek separate Stock Market listings for the Heavy Building Materials and Construction Services businesses.
Tarmac HBM is financially stronger than Construction Services. Last year it made operating profits of £142M on turnover of £1.2bn. Construction Services made profits of £29M on turnover of £1.6bn.