Virgin Media O2 and Daisy Group Announce £1.4 Billion B2B Merger
In a significant move to shake up the UK business communications and IT sector, Virgin Media O2’s business division, VMO2 Business, has announced plans to merge its operations with those of the Daisy Group. The new entity, which will have annual pro forma revenues of around £1.4 billion, aims to create a major new force in the industry.
According to a statement released by ISPreview, the merger will see VMO2 Business combine its complementary direct B2B operations with those of the Daisy Group, with Daisy holding a 30% stake in the business and VMO2 holding the remaining 70%. The new company will be led and chaired by Daisy Group founder, Matthew Riley, and Jo Bertram, MD of VMO2 Business, as CEO.
The deal, which is subject to regulatory approvals, is expected to close in early H2 2025. VMO2’s fixed and mobile wholesale operations, which include smart metering and connectivity to MVNO customers, will remain fully owned within VMO2. At the outset, both businesses will continue to operate under their separate brands from their current office bases, although this may well change over time.
The new entity, which will serve "hundreds of thousands of UK businesses", will aim to benefit from its greater scale and expertise, not to mention the ability to more closely access VMO2’s fixed fibre optic and mobile network infrastructure, combined with Daisy’s end-to-end IT and sales management platforms and support teams. As ISPreview reported, the company is expected to deliver around £600m of operational synergies on a net present value basis, including integration costs, primarily attributable to cost savings.
Lutz Schüler, CEO 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. 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." He added that 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.
Daisy Group Founder and Chairman, Matthew Riley, also commented on the deal, stating: "This is a significant milestone in Daisy’s 24-year history. 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."
The transaction will be structured through the contribution of an approximately £425m secured intercompany loan by VMO2 and approximately £835m of debt by Daisy Group. VMO2 is also 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. Based on full year 2024 performance, the new entity will have adjusted EBITDA of £150m and adjusted EBITDA less Capex of £100m.
As reported by ISPreview, VMO2 was advised on the deal by Jefferies, Deloitte, A&O Shearman, Simmons & Simmons and Ropes & Gray. For Daisy and its shareholders, Houlihan Lokey and EY are acting as financial advisers, PwC acting as tax advisers, and Paul Weiss, Clifford Chance and DWF as legal advisers.
The merger is expected to drive further growth through greater scale, efficiencies and a combined set of products, although job cuts are also a possibility from such deals. The new entity will undoubtedly be a major player in the UK business communications and IT sector, and it will be interesting to see how the company develops in the coming months and years.
The deal has been widely reported as a significant move in the UK business communications and IT sector, with many analysts predicting that it will have a major impact on the industry. As the sector continues to evolve, it is clear that companies such as Virgin Media O2 and Daisy Group are looking to position themselves for future growth and success.
In conclusion, the merger between Virgin Media O2’s business division and the Daisy Group is a significant move that is set to shake up the UK business communications and IT sector. With a new entity that will have annual pro forma revenues of around £1.4 billion, the company will be a major player in the industry and will undoubtedly have a significant impact on the market. As reported by ISPreview, the deal is subject to regulatory approvals and is expected to close in early H2 2025.
