Microsoft buys a 4% stake in the London Stock Exchange | Daily News Byte

Dec 12 (Reuters) – Microsoft ( MSFT.O ) will take a 4 percent stake in London Stock Exchange Group ( LSEG.L ) as part of a 10-year commercial deal to migrate the exchange operator’s data platform to the cloud, the British company said on Monday.

It is the latest sign of deepening ties between financial services providers and several major global cloud companies such as Microsoft, Google ( GOOGL.O ), Amazon ( AMZN.O ) and IBM ( IBM.N ), which have prompted regulators to take a closer look connections.

Microsoft has long-standing ties to LSEG, but the exchange group’s CEO, David Schwimmer, said they began talking about closer ties about a year ago.

“It’s a long-term partnership. In terms of the products we’re going to build together, I would expect our customers to start seeing the benefits in those 18 to 24 months and we’ll continue to build from there,” Schwimmer told Reuters.

Regulators have expressed concern about financial firms’ over-reliance on too few cloud providers, given the disruption it could cause across the sector if a provider fails.

The European Union has just approved legislation introducing safeguards for financial services cloud providers, and Britain should follow suit.

“It should be assumed that we don’t like to surprise our regulators,” Schwimmer said, when asked if LSEG had made sure regulators were on board.

LSEG said the Microsoft tie-up was a partnership to take advantage of “consumption-based pricing” rather than a traditional cloud deal.

“We will continue to maintain our multi-cloud strategy and work with other cloud providers,” Schwimmer said.

The deal was not about cost savings by outsourcing cloud activities, but about significant incremental revenue growth as new products come on stream over time.

“This appears to be a key milestone in LSEG’s journey to becoming more information solutions focused, even if ‘meaningful’ revenue growth specifics are lacking,” analysts at Jefferies said.

As part of the deal, LSEG contractually committed to a minimum cloud spend with Microsoft of $2.8 billion over the life of the partnership.

Microsoft said the foundation of the partnership will be the digital transformation of LSEG’s technology infrastructure and the Refinitiv platform in the Microsoft Cloud.

“The initial focus will be on providing interoperability between LSEG Workspace and Microsoft Teams, Excel and PowerPoint with other Microsoft applications and the new version of LSEG Workspace,” the American company said.

Shares of LSEG rose 4% in early trade.

LSEG bought Refinitiv for $27 billion from a consortium of Blackstone and Thomson Reuters, turning the stock exchange into the second-largest financial data company behind Bloomberg LP.

LSEG has made “good progress” in its program to deliver its cloud-based data platform since completing its acquisition of Refinitiv in January 2021, it said.

Microsoft will buy LSEG shares from the Blackstone ( BKS.N )/Thomson Reuters ( TRI.TO ) consortium, the exchange operator said.

Thomson Reuters, which owns Reuters News, has a minority stake in LSEG following a deal with Refinitiv.

Microsoft’s acquisition is expected to close in the first quarter of 2023.

Reporting by Iadarisa Shabong in Bengaluru; Editing by Nivedita Bhattacharjee, Jane Merriman and Louise Heavens

Our Standards: Thomson Reuters Trust Principles.