Virgin Media O2 and Daisy Group have announced plans to merge their complementary direct B2B operations to create a major new force in the UK business communications and IT sector.
With annual pro forma revenues of around £1.4bn, the new entity, formed of substantially all of Virgin Media O2 Business and Daisy Group, will be consolidated by Virgin Media O2 with Daisy Group holding a 30% stake.
The deal is described as value-accretive for all parties and is projected to drive further growth through greater scale, efficiencies and a combined set of products.
The company will be led and chaired by Daisy Group founder, Matthew Riley, and Jo Bertram, managing director of Virgin Media O2 Business, as CEO.
At the outset, both businesses will operate under their separate brands from their current office bases.
The dedicated new company will serve the communications and IT needs of hundreds of thousands of UK businesses – small offices, SMEs, large enterprises and public sector organisations, as well as indirect partners. Virgin Media O2’s fibre and mobile infrastructure will be combined with Daisy’s end-to-end IT and sales management platforms and customer service.
Services will include cloud-based communications tools, 5G Private Networks, IoT connectivity, security solutions and AI-powered products, such as O2 Motion, catering to a broad mix of new and existing customers.
The company will be supported by fixed and mobile connectivity wholesale agreements with Virgin Media O2, and supplier arrangements with Telefónica and Liberty Global.
“This is a significant milestone in Daisy’s 24-year history,” said Riley. “This transformational transaction will revolutionise the telecommunications and IT landscape and create the most comprehensive offering for businesses of all sizes across the UK.
“Growth is top of the political and business agenda – inextricably linked to this is access to world-class IT and communications infrastructure that is integrated and can scale. Our new entity, which brings together two highly successful companies, will deliver a comprehensive solution for the fast-changing needs of UK organisations supported by specialist teams that have a relentless focus on customer service.
“It will be driven by the entrepreneurial spirit for which we are known and will catalyse the next phase of our ambitious growth plans.”
Based on full-year 2024 performance, the entity will have approximate pro forma revenues of £1.4bn and adjusted EBITDA of £150m. It is expected to deliver around £600m of operational synergies on a net present value basis, including integration costs, primarily attributable to cost savings.
This equates to a pre-tax annual run-rate of around £70m by 2030.
The transaction will be structured through the contribution of an approximately £425m secured intercompany loan by Virgin Media O2 and approximately £835m of debt by Daisy Group. Virgin Media O2 is set to raise additional financing at its cost of debt at closing, enabling the repayment of existing Daisy facilities through a second secured intercompany loan.
The transaction is expected to close in early H2 2025, subject to customary regulatory approvals, with further director and management announcements occurring in due course.
“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,” said Lutz Schüler, CEO of Virgin Media O2.
“For us, it’s a big step forward in our journey to boost B2B growth and provide UK businesses of all sizes with the best digital and connectivity offerings. 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.
“We can’t wait to get started on this next chapter in partnership with Daisy.”