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Microsoft takes £1.5bn stake in London Stock Exchange

London Stock Exchange in London - Peter Nicholls/REUTERS
London Stock Exchange in London - Peter Nicholls/REUTERS

Microsoft has taken a £1.5bn stake in the London Stock Exchange Group in a stunning approach by the big tech giant for one of the world's oldest financial institutions.

The investment, part of a 10-year deal which will see the bourse using Microsoft's internet "cloud" technology, gives the US company a 4pc stake in one of Britain's most storied financial services companies.

The US giant will buy shares from a consortium made up of Thomson Reuters and Blackstone, which took a stake in the LSE after selling data company Refinitiv to the UK-listed exchange for £21bn.

Shares in the LSE jumped 4pc in trading on Monday, making Microsoft's stake worth roughly £1.5bn. The UK-listed stock is up 9pc so far this year in a rare bright spot amid an otherwise gloomy UK equities market.

The LSE's acquisition of Refinitiv, under boss David Schwimmer, was supposed to transform the financial group – which was founded in 1801 but has a history dating back to London's original coffeehouse brokers in the 1700s – from a company that made revenues out of company share trades and listings into an international data and information giant.

The Microsoft investment comes after the LSE failed, on a third attempt, to secure a blockbuster merger with German rival Deutsche Borse in 2017. The deal also represents one of the UK's biggest ever "cloud" contracts in the UK's private sector.

The Microsoft deal will see LSE spend a minimum of £2.3bn over the next decade on a digital makeover using the US giant's technology, including its Azure data storage product, its Teams communication tools and integrating artificial intelligence into its products.

It is one of the biggest interventions by a Big Tech giant in financial markets. While Apple and Google both offer consumer products, such as mobile payment services, neither has taken on a comparable strategic stake in a bourse.

The investment also follows an announcement from the Financial Conduct Authority in October, which said it would investigate the influence of Big Tech companies on the financial services sector.

Telecoms regulator Ofcom is also reviewing the dominance of Microsoft, Amazon and Google in the UK internet services, or cloud, market.

The LSE said it would spend £250m to £300m between 2023 and 2025 on the new contract.

CEO David Schwimmer - BRENDAN MCDERMID/REUTERS
CEO David Schwimmer - BRENDAN MCDERMID/REUTERS

David Schwimmer, LSE chief executive, said: "This strategic partnership is a significant milestone on LSEG's journey towards becoming the leading global financial markets infrastructure and data business, and will transform the experience for our customers."

Satya Nadella, Microsoft's chief executive and chairman, 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."

Microsoft executive vice-president Scott Guthrie will join the LSE's board. The tech giant said it expected the LSE and other financial services deals resulting from the contract to drive $5bn in revenues for the tech giant.