Microsoft becomes shareholder in the London Stock Exchange Group
Microsoft snapped up a stake in the London Stock Exchange Group this morning, as big tech continues to disrupt the world of trading.
As part of the deal, Microsoft will buy a four per cent stake in the exchange worth about £1.5bn from Blackstone, Thomson Reuters, Canada Pension Plan Investment Board and Singapore’s sovereign wealth fund GIC.
The London Stock Exchange Group (LSEG) told investors it will spend £100m over the next three years on a decade-long deal for analytics, cloud and artificial intelligence (AI) infrastructure from Microsoft.
It comes as Silicon Valley continues to dip its toes into the global markets, with Google and Amazon Web Services both making investments in the Chicago-based CME and Nasdaq respectively in 2021.
However, the London exchange flagged to investors that the deal would cost between £250m and £300m until 2025, including around £100m in capital expenditure.
LSEG said the agreement would weigh heavily on its earnings before interest, taxes, depreciation, and amortisation.
Stock exchange chief David Schwimmer qualified the earnings dip, telling investors it would create “attractive revenue growth opportunities” for both firms.
“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. “We look forward to delivering on that potential.”
Commenting on the move, corporate partner at the law firm Gowling WLG David Brennan said the tie-up promises to transform the customer experience and help LSEG to “maintain its position as the international stock exchange of choice”.
“In a post-Brexit world, such an exciting partnership is clearly very good news for both UK capital markets and our international fintech creds,” he said.
Analysts at Jefferies also backed the deal and its potential to offer an alternative to Bloomberg.
“This feels like a key milestone in LSEG‘s journey towards being information solutions-centric, even if ‘meaningful’ revenue growth specifics are lacking,” they said.
The LSEG has been on a mission to bolster a more cloud-centric approach since it acquired financial data company Refinitiv for $27bn in January 2021 – a deal that turned the exchange into the second largest financial data company after Bloomberg LP.
LSEG shares climbed four per cent in early morning trade and were up by three per cent this afternoon.