Belgian company Groupe Bruxelles Lambert, the investment company of billionaire Albert Frere, will also join Lafarge's board of directors.
Lafarge said the acquisition would give it a leading position in the Middle East and Mediterranean basin and would result in synergies of more than 150 million euros a year.
Lafarge shares surged 11 percent to 119.47 euros, their highest level since early October. At that price, Lafarge has a stock market value of roughly 21 billion euros, slightly above Swiss rival Holcim.
Orascom shares hit an all-time high of 600 Egyptian pounds but retreated 2.7 percent to 530 pounds.
Lafarge Raises Financial Targets
Investment bank Natixis raised its rating on Lafarge to "buy" from "add."
"What is pleasing for investors is the fact that Lafarge is getting access to markets with a strong growth potential," said Stratege Finance fund manager Jacques Tissier, who holds Lafarge shares in his portfolio.
Lafarge also raised its financial targets as a result of this acquisition. Lafarge said it was expecting net earnings per share of more than 15 euros in 2010 and free cash flow of more than 3.5 billion euros in 2010.
The French company also said it planned asset sales of 1 billion euros over the next two years. It said the Orascom Cement deal would be accretive to its earnings per share (EPS) from the first year onwards.
"This acquisition of a leading Egyptian group is a decisive opportunity to accelerate our profitable growth strategy in cement in emerging markets," Lafarge Chairman and Chief Executive Bruno Lafont said in a statement.
"As a result of the transaction, 65 percent of Lafarge's EBITDA (earnings before interest, tax, depreciation and amortization) is expected to be generated in emerging markets in 2010, relative to 45 percent in 2007," he added.
Lafont also said Lafarge could make further acquisitions in high-growth emerging markets in the future.
The deal is expected to be completed at the end of the first quarter of 2008.
Speaking on a conference call, Egyptian construction billionaire Sawiris told reporters that OCI would initially get two seats on Lafarge's board, but declined to say whether he planned to seek a larger stake later.
"We have committed to return approximately $11 billion of the proceeds of the divestment to OCI shareholders," he added.
He said OCI would continue developing its construction operations and investments in infrastructure and natural gas, starting with a $2 billion dollar cash reserve that will go towards supporting growth in those areas.
BNP Paribas, Calyon and Morgan Stanley advised Lafarge on the transaction. Citigroup advised Orascom Cement.