The partners billed the deal as a merger of equals under which Lafarge shareholders will receive one Holcim share for every Lafarge share held, with the combined group to be based in Switzerland and listed in Zurich and Paris.
Shares in Lafarge rose 4 percent at the open, the top gainer on France's blue-chip CAC 40 index, while shares in Holcim were up 5.4 percent.
The new entity, worth just under $60 billion, will see 53 percent shareholder control for Holcim and 47 percent for Lafarge, the companies said in a joint website presentation, which follows news the pair were in talks on Friday and agreement over the weekend.
The deal will be the industry's biggest-ever tie-up, and would help the companies slash costs, trim debt and better cope with the soaring energy prices, tough competition and weaker demand that have hurt the sector since the 2008 economic crisis.
The groups complement each other well geographically, with Lafarge stronger in Africa and Holcim stronger in Latin America, company executives told reporters on a conference call.
The merged group will be present in 90 countries, with emerging markets such as Latin America and Africa accounting for 60 percent of sales, but no single country representing more than 10 percent.
"The new group will offer higher growth and low risk, thus creating more value," said Lafarge Chief Executive Bruno Lafont, who will become CEO of LafargeHolcim.
The companies added that they expected total annual savings from joining forces of 1.4 billion euros after three years, thanks to economies of scale, better operational efficiency and lower financing costs.
"Globally, it's likely that growth over the next 10 years will be lower than in the 10 years before the financial crisis, and one has to adapt correspondingly; this is happening on the cost side," said Vontobel analyst Panagiotis Spiliopoulos.
The deal is expected to draw scrutiny from competition watchdogs, however, with UBS analysts pointing to antitrust issues in key markets including Brazil, Canada, Ecuador, France, the UK, the United States, Morocco and the Philippines.
"Given the number of potential issues and required remedies, we expect a lengthy approval process, possibly taking up to two years," UBS analysts wrote.
Lafarge and Holcim confirmed that they would sell businesses worth 10-15 percent of the group's earnings before interest, tax, depreciation and amortisation (EBITDA) to satisfy antitrust concerns.
They have combined EBITDA of 6.5 billion euros. Based on a multiple of eight times EBITDA, they could dispose of 5 to 8 billion euros' worth of business, Natixis analysts wrote.
Two-thirds of the asset sales would be in Europe, Lafont said on a conference call. The companies also have overlapping business operations in Canada, Brazil, India and China, Lafont said. He declined to give more details on which countries might be most affected by asset sales.
"We are immediately going to start discussions with the European Commission and other competition regulators in a constructive spirit," Lafont said, stressing that the assets for sale were of "very high quality".
"This guarantees their attractiveness to potential buyers, and it also gives us confidence in our ability to make these divestments."
He said the combined company would continue to improve operational performance but "there are no plant closures associated with this deal".
Synergies at EBITDA level are made up of 200 million euros at operational level, 340 million in purchasing, 250 million euros in sales and 200 million euros in innovation. On top of this, the company sees 200 million euros of savings on financial costs and 200 million for investments.
Lafarge's largest shareholder, Belgian holding company Groupe Bruxelles Lambert which has a 21 percent stake, said it would support the deal and would hold about 10 percent in the combined group after the transaction was completed.
Switzerland's Thomas Schmidheiny and Filaret Galchev from Russia control a total of 31 percent of Holcim, while Lafarge's two biggest shareholders are GBL and Egyptian tycoon Nassef Sawiris, who has 16 percent according to Thomson Reuters data.
The transaction has the support of core shareholders and is expected to close in the first half of 2015, the companies added.