Two of the best-known community enterprises in the north will announce a merger today, creating a business ranging from publishing the Big Issue to managing inner-city health services.

The deal establishes a not-for-profit consortium employing 140 people with an annual income this year of more than £5m.

The new partners are publisher The Big Issue in the North, which also runs drug rehabilitation and education services for the magazine's homeless vendors, and the Manchester social business Diverse Resources.

Their decision to link follows more than a year of discussions about winning more clout for regeneration groups by using the investment methods and entrepreneurial approach of the private sector.

The Big Issue in the North has seen spectacular growth under the chairmanship of Anne McNamara, who bought the title from the national Big Issue in 1992 and has built sales to 57,000 a week. Support services for vendors have grown at a similar rate, from £316 per vendor in 1997 to £1,245 this year.

Diverse Resources has also grown in its first decade from a small-scale health support project to the first voluntary sector body to win a sizeable contract to manage NHS services. The company tendered successfully to develop and run the new Kath Locke health centre serving Hulme and Moss Side in Manchester, which now houses a range of support services and a café, as well as dentists, psychiatric nurses and GPs.

The new operation will be headed by Fay Selvan, chief executive of Diverse Resources, while Ms McNamara and the Big Issue in the North's chief executive, Val Chinn, launch a related social enterprise venture. The two women are setting up a social venture capital company called F2, designed to raise funds for both the new joint company and other community businesses.