Microsoft Corp. has agreed to buy a stake in London Stock Exchange Group Plc that will give the software company a 4% equity holding as part of a new long-term strategic partnership between the two firms.
Microsoft will acquire shares held by a consortium made up of Blackstone and Thomson Reuters Corp., LSEG said in a statement on Monday. At Friday’s closing price, a 4% stake was valued at around £1.6 billion ($2 billion).
The stake is part of a broader, 10-year agreement to help the London Stock Exchange owner develop data analytics and cloud infrastructure using Microsoft’s products, the Redmond, Washington-based company said in the statement. Scott Guthrie, Microsoft’s executive vice president for cloud and artificial intelligence, will be appointed as a director.
“We are delighted to welcome Microsoft as a shareholder,” Chief Executive Officer David Schwimmer said in the statement. “Bringing together our leading data sets, analytics, and global customer base with Microsoft’s comprehensive and trusted cloud services and global reach creates attractive revenue growth opportunities for both companies.”
The deal is expected to cost LSEG between £250 million ($306 million) to £300 million between 2023 and 2025, including about £100 million in capital spending. The group said it has made a contractual commitment with Microsoft to spend a minimum of $2.8 billion (£2.3 billion) on cloud-related services and support over the next 10 years.
Shares in LSEG rose 4.6% at 8:06 a.m. in London.
Additional Spending
Additional spending depends on the “success of the strategic partnership” and demand for LSEG’s data platform and professional services. Microsoft estimated in a separate statement that the “partnership, and broader market opportunity, could generate an additional $5 billion in revenue for the company over the next 10 years.”
Under the arrangement, LSEG’s data platform and other key technology infrastructure will migrate to Microsoft’s Azure cloud environment while its data and analytics will interface with certain Microsoft applications.
The deal underlines LSEG’s increasing focus on data and analytics. The company completed a $27 billion purchase of Refinitiv last year, kicking off a new era where the majority of its revenues come from data. The parent company of Bloomberg News competes with Refinitiv to provide financial news, data and information.
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