Microsoft is to buy 4% of the London Stock Exchange as part of a multi-billion pound deal to work together on data analytics and cloud technology.
The American technology company will acquire a stake from a consortium of Blackstone and Thomson Reuters, and will take a seat on the board of the London Stock Exchange Group (LSEG). The consortium previously sold financial data firm Refinitiv to LSEG in a £22bn buyout.
The latest deal will unite the exchange with one of the most powerful technology companies in the world. LSEG, which manages the FTSE 100, a stock market index in which it also trades, has close ties to the UK government and is likely to play a key role in ministers’ hopes of revitalizing the city of London.
The share purchase comes as London fights to retain its crown as Europe’s financial centre. UK equity accounted for $1.8bn (£1.46bn) of the $20.9bn raised in European listings this year, according to Bloomberg data. At just 9% of the total, it is the lowest share since the financial crisis of 2007-08.
Last month, the combined market capitalization of primary shares in France briefly overtook the UK for the first time. LSEG’s continental rival Euronext has been on a buying spree in recent years, acquiring the Irish exchange in 2018 and taking over Borsa Italiana, the Italian stock exchange, last year.
Instead of the European Union’s financial centre, London had been downgraded to “the UK’s biggest financial centre”, Euronext chief executive Stéphane Boujnah said last week.
Still, while London’s appeal for stock quotes has waned, it remains a dominant force in currency clearing. LSEG is the majority shareholder of LCH, the world’s largest clearing house for some forms of financial contracts intended to cover risks for companies and financial institutions.
Microsoft’s share purchases are likely to be welcomed by investors in LSEG, which is led by CEO David Schwimmer. LSEG’s share price rose 4% in early trading on Monday, making it the biggest gainer on the FTSE 100.
Financial data companies such as LSEG, Bloomberg and S&P Global are scrambling to provide new tools for investors and analysts to sort through the vast amounts of data in search of investment opportunities.
Microsoft and LSEG said they had agreed to a “10-year strategic partnership for next-generation cloud analytics and data infrastructure solutions,” overseen on LSEG’s board by Scott Guthrie, Microsoft’s executive vice president for cloud and artificial intelligence
LSEG will move its cloud and data management services to Microsoft, as well as use its office software and integrate the technology it provides to financial industry professionals with Microsoft.
The deal will cost LSEG between £250m and £300m in new cash costs, and the company expects to spend at least $2.8bn (£2.3bn) on cloud services with Microsoft over the decade. That spending could increase if demand for new services increases, LSEG said.
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In a statement to the stock market on Monday, LSEG said the deal was “expected to increase LSEG’s revenue growth significantly over time as new products roll out.”
Microsoft Chairman and CEO Satya Nadella said: “Advances in the cloud and artificial intelligence will fundamentally transform the way financial institutions research, interact and transact across asset classes, adapting to changing market conditions”.
The companies will work together to “generate business insights, automate complex and time-consuming processes and ultimately do more with less,” Nadella said.
Schwimmer said it was a significant milestone that would transform the experience for its customers.
“We are delighted to welcome Microsoft as a shareholder. We believe our partnership with Microsoft will transform the way our clients discover, analyze and trade securities around the world, and will create substantial value over time,” he added .