Paddy Power and Betfair have agreed on a STG5 billion ($A11.00 billion) merger to create one of the world's largest online gambling businesses, with more than 7,000 staff and STG1.2 billion ($A2.65 billion) in sales.

The companies confirmed details of the tie-up after revealing the plans last month, marking the latest in a string of deals in the industry as it faces new taxes on online gambling and the need to invest in marketing and technology.

The combined group - to be called Paddy Power Betfair - will have its headquarters in Dublin and is set to maintain a "significant presence" in the UK and Ireland.

They will continue to run separate brands in the UK, Ireland and Italy after the merger, which will see Paddy Power shareholders own 52 per cent of the combined business, with Betfair investors owning the remaining 48 per cent.

But the firms warned of job losses under plans for around STG50 million ($A110.30 million) in annual cost savings after the merger.

They said while no decisions have been taken, there was potential for cutbacks in some operational and support functions, which "may involve some headcount reduction".

The deal - dubbed "Betty Power" in the industry - will bring together Paddy Power's 336 shops in the UK and 252 stores in Ireland with Betfair's online betting exchange.