Microsoft will buy 4% of the London Stock Exchange as part of a multibillion-pound agreement to collaborate on data analytics and cloud technology.
The US technology firm will buy the stake from a consortium led by Blackstone and Thomson Reuters and will join the board of the London Stock Exchange Group (LSEG). Previously, the consortium sold the financial data company Refinitiv to LSEG for £22 billion.
The latest agreement will bring the exchange together with one of the world’s most powerful technology companies. The LSEG, which runs the FTSE 100, a stock market index on which it is also listed, has close ties to the UK government and will almost certainly play a key role in ministers’ efforts to revitalize the City of London.
The stock purchase comes at a time when London is struggling to retain its position as Europe’s financial center. According to researched data, the UK capital accounted for $1.8 billion (£1.46 billion) of the $20.9 billion raised in European listings this year. It is the lowest share since the 2007-08 financial crisis, accounting for only 9% of the total.
Last month, the combined market capitalization of primary listings in France briefly surpassed that of the United Kingdom. Euronext, LSEG’s continental rival, has been on a buying spree in recent years, acquiring the Irish stock exchange in 2018 and Italy’s stock exchange last year.
London had been demoted to “The Largest Financial Centre of the United Kingdom” rather than the European Union’s financial center, according to Euronext’s chief executive, Stephane Boujnah, said last week.
Arising Wave of Market
Nonetheless, while London’s appeal for stock exchange listings has waned, it continues to be a dominant force in currency clearing. LSEG owns a majority stake in LCH, the world’s largest clearing house for certain types of financial contracts used to hedge risks for businesses and financial institutions.
Microsoft’s share purchases are likely to be welcomed by LSEG investors, who are led by CEO David Schwimmer. LSEG’s share price increased by 4% in early trading on Monday, making it the FTSE 100’s biggest riser.
Financial data companies such as LSEG, Bloomberg, and S&P Global are racing to develop new tools to help investors and analysts sort through massive amounts of data in search of investment opportunities.
Microsoft’s Strategic Move
Microsoft and LSEG announced a 10-year “strategic partnership for next-generation data and analytics and cloud infrastructure solutions,” with Scott Guthrie, Microsoft’s executive vice president for cloud and artificial intelligence, serving on LSEG’s board.
LSEG will migrate its data handling and cloud services to Microsoft, as well as use its office-working software and integrate the technology it provides to financial industry professionals.
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) with Microsoft on cloud services over the next decade. According to LSEG, this spending could rise if demand for new services rises.
Microsoft’s chair and CEO, Satya Nadella 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.”
According to Nadella, “The companies will collaborate to generate business insights, automate complex and time-consuming processes, and ultimately do more with less.”
Schwimmer described it as a significant milestone that would transform the customer experience, by saying “We are thrilled to have Microsoft as a shareholder.” He further added, “We believe that our collaboration with Microsoft will transform the way our customers discover, analyze, and trade securities around the world and that it will create significant value over time.” he concluded.