Microsoft will buy 4% of the London Stock Exchange as part of a multibillion-pound deal to work together on data analytics and cloud technology.
The US tech company will acquire the 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 the financial data company Refinitiv to LSEG in a £22bn takeover.
The latest deal will unite the exchange with one of the world’s most powerful tech companies. The LSEG, which runs the FTSE 100, a stock market index on which it is also listed, has tight links to the UK government and is likely to play a key part in ministers’ hopes to reinvigorate the City of London.
The stock purchase comes as London struggles to retain its crown as Europe’s financial centre. The UK capital accounted for $1.8bn (£1.46bn) of the $20.9bn raised in European listings this year, according to Bloomberg data. Representing just 9% of the total, it is the lowest share since the 2007-08 financial crisis.
Last month, the combined market capitalisation of primary listings 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 stock exchange in 2018 and picking up the Borsa Italiana, Italy’s stock exchange, last year.
Rather than the financial centre of the European Union, London had been downgraded to “the largest financial centre of the United Kingdom”, Euronext’s chief executive, Stéphane Boujnah, said last week.
Still, while London’s appeal for stock listings has waned, it remains a dominant force in currency clearing. LSEG is the majority shareholder in LCH, the largest clearing house in the world for some forms of financial contracts that are meant to hedge risks for businesses and financial institutions.
Microsoft’s share purchases are likely to be welcomed by investors in LSEG, which is led by the chief executive, David Schwimmer. LSEG’s share price rose by 4% in early trading on Monday, making it the biggest riser on the FTSE 100.
Financial data companies, including LSEG, Bloomberg and S&P Global, are racing to provide new tools to investors and analysts to sort through the huge amounts of data in search of investment opportunities.
Microsoft and LSEG said they had agreed a 10-year “strategic partnership for next-generation data and analytics and cloud infrastructure solutions”, overseen on LSEG’s board by Scott Guthrie, Microsoft’s executive vice-president for cloud and artificial intelligence.
LSEG will move its data handling and cloud services on to Microsoft, as well as using its office-working software and integrating the technology it offers 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 course of the decade. That spending could rise if demand for new services increases, LSEG said.
In a statement to the stock market on Monday, LSEG said the deal was “expected to increase LSEG’s revenue growth meaningfully over time as new products come on-stream”.
Satya Nadella, Microsoft’s chair and chief executive, said: “Advances in the cloud and AI will fundamentally transform how financial institutions research, interact, and transact across asset classes, and adapt 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 customers discover, analyse and trade securities around the world, and create substantial value over time,” he added.
• This article was amended on 13 December 2002 to give the full name of the “London Stock Exchange Group” in the headline.
