Daily Mail owner DMGT says it has struck an Stg500 million ($A1 billion) deal to buy rival newspaper the Telegraph in a tie-up that would create one of the most powerful right-leaning media groups in Britain.

The deal comes a week after US-based private investment firm RedBird Capital Partners withdrew its bid for the Daily Telegraph, one of Britain's biggest newspapers.

Daily Mail and General Trust (DMGT) agreed to purchase the Telegraph from RedBird IMI after an attempted purchase by the Abu Dhabi-backed RedBird Capital Partners investment firm was blocked by the then Conservative government.

People close to the talks said the transaction was worth about Stg500 million ($A1 billion).

The parties have entered a period of exclusivity to finalise the terms of the transaction and to prep

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