Microsoft is to take a 4 per cent equity stake in London Stock Exchange Group as part of a 10-year commercial deal to migrate the exchange operator’s data platform into the cloud, the British company said on Monday.
As part of the deal, LSEG has made a contractual commitment for minimum cloud-related spend with Microsoft of $2.8 billion over the term of the partnership. 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 per cent stake was valued at around 1.6 billion pounds ($2 billion).
Microsoft said the basis of the partnership will be the digital transformation of LSEG’s technology infrastructure and Refinitiv platforms on to the Microsoft Cloud.
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“The initial focus will be on delivering interoperability between LSEG Workspace and Microsoft Teams, Excel and PowerPoint with other Microsoft applications and a new version of LSEG’s Workspace,” the US company said.
The deal is expected to cost LSEG between 250 million pounds ($306 million) to 300 million pounds between 2023 and 2025, including about 100 million pounds 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 pounds) on cloud-related services and support over the next 10 years
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.
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.”
Microsoft’s purchase is expected to complete in the first quarter of 2023.
LSEG shares were up 4 per cent in early trade. Overall, European shares fell on Monday, as investors braced for interest rate decisions from the U.S. and European central banks later this week.