Virgin Media O2 has agreed a merger deal of its business customer operation with Daisy Group in a tie-up that will create a “powerhouse” telecoms company with around £1.4 billion in sales.

The combined group will be majority owned by Virgin Media O2, which will hold a 70% stake, with Daisy owning the remaining 30%.

The new firm – which is as yet unnamed – will be led by Virgin Media O2 Business managing director Jo Bertram, who will become chief executive of the newly merged firm, with Daisy group founder Matthew Riley acting as chairman.

It is thought the new firm will have around 700,000 customers in total, with the deal bringing together Virgin Media’s broadband fibre network and mobile infrastructure with Daisy’s IT platforms and customer service offering.

The pair are hoping to deliver around £600 million in cost savings from the merger, equating to around £70 million a year by 2030, with more than half within the first three years.

Mr Riley, who is the majority stakeholder in Daisy, told the PA news agency there will be “significant” cost savings from merging Virgin Media O2’s B2B customers onto its billing systems and IT platform.

He said he could not give “categorical assurances” that the deal will not impact the firm’s 1,400 workers or its sites, but said there was very little overlap between the two businesses and hopes he can retain the group’s headquarters in Nelson, Lancashire.

Lutz Schuler, chief executive of Virgin Media O2, said: “Combining Virgin Media O2 Business with Daisy Group is the perfect pairing and creates a new British business connectivity powerhouse and greater competition in the market.

“Following completion, the new company will have the scale, talent, focus and infrastructure needed to drive digital transformation and provide business customers with an innovative one-stop shop for all their communications and IT needs,” he added.

Daisy has nine sites across the UK – Nelson, Sheffield in South Yorkshire, Birmingham, London, Sidcup in south-east London, Basildon in Essex, Bournemouth in Dorset, West Bromwich in the West Midlands and Prudhoe in Northumberland.

Virgin Media O2 declined to give staff numbers for its business-to-business (B2B) operation, but employs around 16,000 workers in total and has offices in locations including Reading, Paddington in London and Manchester.

The pair did not say how much the combined group would be worth.

The deal is expected to close early in the second half of 2025, but must first get approval from the Competition and Markets Authority, the Financial Conduct Authority and the Government – given that Virgin Media O2 provides critical UK telecoms infrastructure.

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Mr Riley, who founded Daisy Group in 2001, said the deal will “catalyse the next phase of our ambitious growth plans”.

He added: “This transformational transaction will revolutionise the telecommunications and IT landscape and create the most comprehensive offering for businesses of all sizes across the UK.”

Customers of the firm will include small offices, small and medium-sized businesses, large companies and public sector organisations, as well as indirect partners, according to the companies.

Virgin Media O2 is already a major supplier to Daisy and the deal comes after the two groups began talks within the past six months.

Mr Riley said he had no plans to leave following the deal.

He told PA: “I don’t want to exit, I want to grow the business.

“It’s a massive opportunity for me and Daisy.”

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