Virgin Media O2 Business and Daisy Group have announced plans to merge their B2B operations to create a £3 billion ($3.96bn) telecoms group in the UK.

In the announcement, Virgin Media O2 Business said the merger will "create a major new force in the UK business communications and IT sector."

Daisy Group is one of the UK's biggest providers of IT, communications, and cloud services to business customers.

A planned merger would see Virgin Media O2 Business own 70 percent of the new entity, with Daisy Group holding the remaining 30 percent stake.

Combined, the company will have around 700,000 customers, annual revenues of around £1.4bn ($1.85bn), and a valuation of between £2.5bn ($3.30bn) and £3bn ($3.96bn) including debt.

The entity will be led and chaired by Daisy Group founder, Matthew Riley, and Jo Bertram, managing director of Virgin Media O2 Business, as CEO.

Riley founded Daisy Group in 2021. The company provides cloud, communications, and IT solutions to companies across the country.

“This is a significant milestone in Daisy’s 24-year history. This transformational transaction will revolutionize the telecommunications and IT landscape and create the most comprehensive offering for businesses of all sizes across the UK," said Riley.

"Our new entity, which brings together two highly successful companies, will deliver a comprehensive solution for the fast-changing needs of UK organizations, 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 catalyze the next phase of our ambitious growth plans.”

Virgin Media O2 Business confirmed that the deal will be structured through the contribution of an approximately £425m ($561m) secured intercompany loan by Virgin Media O2 and approximately £835m ($1.1bn) of debt by Daisy Group.

“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," added Lutz Schüler, CEO of Virgin Media O2.

"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.”

The transaction is expected to close in early H2 2025, subject to customary regulatory approvals.