The plan is to create “communications and IT powerhouse for UK businesses”, with Virgin Media O2 owning 70% and Daisy Group 30%
Virgin Media O2 and Daisy Group announced plans to merge their dedicated B2B operations to create “a major new force in the UK business communications and IT sector”. The two have combined, pro forma revenues of around £1.4 billion. 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 company will be led and chaired by Daisy Group’s founder, Matthew Riley, with Jo Bertram, Managing Director of Virgin Media O2 Business, as CEO. At the outset, the businesses will operate under their separate brands from their current office bases.
The transaction is expected to close in early in the second half of 2025, subject to customary regulatory approvals, with further director and management announcements occurring in due course.
Economies of scale
The idea is that the new entity will offer economies of scale and “best-in-class digital-first connectivity solutions and managed services all under one roof”. This 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 to leverage high-growth products and services from across the portfolio of those wider shareholder groups.
Virgin Media O2’s fixed and mobile wholesale operations, which include smart metering and connectivity to MVNO customers, will remain fully owned within Virgin Media O2.
Lutz Schüler, CEO of Virgin Media O2, said, “Combining Virgin Media O2 Business with Daisy Group is…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.”
Daisy Group’s Founder and Chairman, Matthew Riley, commented, “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.”
Transaction details and financial profile
The transaction will be structured through the contribution of an approximately £425 million secured intercompany loan by Virgin Media O2 and approximately £835 million 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 entity will be fully consolidated by Virgin Media O2, with the transaction set to have a minimal short-term impact on Virgin Media O2’s overall leverage, and the company’s 4x – 5x medium term leverage range target will remain unchanged. Cash flow distribution to shareholders will follow an alike policy to Virgin Media O2, with an initial focus on deleveraging. Conventional exit provisions have also been agreed, providing strong future optionality.
Matthew Riley founded Daisy Group in 2001. It is now one of the UK’s largest independent, specialist communications businesses delivering cloud, communications and IT solutions to companies across the country.
Transaction Advisers
In connection with the transaction, advisers for Virgin Media O2 and its shareholders include Jefferies as financial adviser and Deloitte supporting on financial due diligence and tax. Legal advisers include A&O Shearman, Simmons & Simmons and Ropes & Gray providing legal advice in relation to the financing.
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.
