TheChek News Flow

Trump eyes easing US chip export restrictions to secure Chinese rare earths

Top White House official says a deal could be struck as part of trade talks between the two countries

A top White House official has said US President Donald Trump would ease restrictions on selling chips to China if Beijing agreed to speed up the export of rare earths, as the two countries began high stakes trade talks in London.

Kevin Hassett, director of the White House National Economic Council, said he expected US and Chinese negotiators to reach a deal that would result in China accelerating the export of rare earths and magnets.

Washington had accused Beijing of reneging on a deal on rare earths reached in Geneva last month as part of the ceasefire in the US-China trade war.

Treasury secretary Scott Bessent is leading the US team in the talks that opened in London on Monday. Trade representative Jamieson Greer and commerce secretary Howard Lutnick are also part of Washington’s delegation. The Chinese delegation is led by He Lifeng, a vice-premier.

“I expect it to be a short meeting with a big, strong handshake,” Hassett told CNBC television on Monday after the trade talks had started. “Our expectation is that . . . immediately after the handshake, any export controls from the US will be eased and the rare earths will be released in volume.”

His comments were the first suggestion that Trump was willing to put export controls on the negotiating table.

It would mark a significant departure from Joe Biden’s administration, which introduced sweeping export controls designed to make it harder for China to obtain advanced US chip technology that could help its military.

Hassett did not specify which exports controls would be eased, but suggested that the administration would not loosen restrictions designed to prevent US chipmaker Nvidia from selling high-end chips to groups in China.

The Financial Times reported last month that the Trump administration was planning to put a number of Chinese chipmakers on a commerce department export blacklist, but that some officials wanted to hold off because they believed the move would have a negative impact on US-China trade talks following the “ceasefire”.

The two sides agreed in Geneva to cut significantly the tariffs they had put on each other for 90 days following concerns about their impact on bilateral trade and global supply chains.

The FT reported on Monday that Chinese exports to the US plunged in May by the most since the start of the Covid-19 pandemic in 2020.

Hassett said Beijing had been “slow rolling” rare earth exports, which had become a “very significant sticking point” following the deal in Geneva. He said the issue was part of the more than hour-long telephone call that Trump held with China’s President Xi Jinping on Friday.

China has repeatedly slammed US export controls. But its willingness to use rare earths to put pressure on the US in recent months is the first time that it has used them in a serious way against American companies.

Thames Water bosses were set for £18.5mn before outcry over bonuses

Creditors have proposed injecting £3bn of equity and taking a 20 per cent writedown on loans in latest rescue plan

Thames Water’s senior management team was set to receive £18.5mn in retention payments agreed as part of a £3bn emergency loan, even as the UK’s largest water utility teetered on the brink of bankruptcy.

The payments — which were paused after an outcry from politicians on the House of Commons environment, food and rural affairs committee — were to be shared between 21 senior members of staff, but excluded chief executive Chris Weston and other top directors.

In total, executives would have received three times their base salary by June next year with a first payment of 50 per cent of salaries already made in April, according to documents released by the committee on Monday. The Thames board does not intend to recover that money, Thames chair Sir Adrian Montague wrote in a letter dated May 30.

The future of Thames Water, which is struggling under a £20bn debt mountain, is hanging in the balance after US private equity firm KKR last week walked away from a £4bn rescue deal for utility, which provides water and sewage services to around a quarter of the UK population.

Feargal Sharkey, the former rock star turned water campaigner, said the payments were an “obscenity that escaped all reasonable decency” and called for the company to be renationalised under the government’s special administration regime.

Thames, which has also been the subject of public anger over sewage overflows and pollution, still faces further potential fines from the Environment Agency of up to £480mn on a “worst case analysis basis”, according to a letter from Weston to the chair of the environment committee.

The potential fines were in addition to £900mn of possible penalties for failing to deliver adequate services to its customers that could be handed out over the next five years, the letter added. The company was already hit with a record fine from Ofwat a fortnight ago.

Thames Water’s bondholders are pushing for the regulator to waive penalties for past environmental breaches to reset the company’s financial performance and escape its “doom loop”.

The creditors, which include the US hedge funds Elliott Management and Silverpoint Capital, have proposed injecting £3bn of equity into Thames and taking a 20 per cent writedown on the value of their loans, according to people familiar with the group’s plans.

That would cut Thames’s debt from £20bn to £12.9bn, paving the way for a return to an investment grade rating, according to people involved in discussions. The group, which includes more than 100 financial institutions who are owed over £13bn by Thames, are hoping to agree a deal next month, they added.

The turnaround plan would involve replacing the utility’s entire board, with Weston also unlikely to stay in post.

The creditors would also lend the company a further £2bn, on top of an expensive £3bn loan that was approved by the high court earlier this year. Thames Water has drawn down £750mn, giving it enough cash to survive until September.

If the creditor deal fails, other investors including CK Infrastructure and Castle Water have indicated that they would still be interested in bidding for Thames, even if it is temporarily renationalised under the government’s special administration scheme. The government has said it is committed to a private-sector solution.

Thames Water said: “The board will consider in the weeks ahead the full recapitalisation and turnaround plan submitted by our creditors.”

Ofwat said it had “commenced a thorough review of the submission from the group of senior creditors. The submission includes their turnaround plans, approach to financial resilience and proposals for governance.”

Parvus shows interest in Danish drugmaker that is hunting for new chief following share price slump

Activist hedge fund Parvus Asset Management is building a stake in Ozempic-maker Novo Nordisk as the drugmaker hunts for a new chief executive following a share price slump.

The London-based hedge fund, which has previously targeted airline Ryanair and gambling group Flutter Entertainment, wants to influence the appointment of Novo Nordisk’s new chief, according to people with knowledge of the details.

Shares in Novo Nordisk have fallen 50 per cent over the past year. A combination of disappointing trial results for its new obesity drug and lower than expected sales figures led investors to conclude that it was losing ground to its US rival Eli Lilly in the weight-loss market.

Last month, it announced that chief executive Lars Fruergaard Jørgensen would be stepping down earlier than planned, although he remains in post until a successor is found. Although it is no longer Europe’s largest listed company, Novo Nordisk still has a market capitalisation of $334bn.

Parvus did not disclose the size of its stake in Novo Nordisk and, under Danish securities rules, does not need to if it owns less than 5 per cent of the company. The activist has total shareholdings of £5.2bn, according to Bloomberg data.

Novo Nordisk, Parvus and the Novo Nordisk Foundation, the drugmaker’s largest shareholder, declined to comment.

The Novo Nordisk Foundation holds the majority of voting rights in the company, making it harder for an activist to influence its plans. The foundation’s chair, Lars Rebien Sørensen, who previously ran the drugmaker, has joined the board as an observer, as part of the process of finding a successor.

Novo Nordisk cut its sales and profit forecasts last month, blaming the rapid expansion of replica obesity drugs in the US. These cheaper alternatives were temporarily allowed when there were shortages but have cut into the market share of branded versions.

Activist investors have previously applied pressure to companies even where their shareholdings have been small: US activist investors Starboard Value and Irenic Capital, for example, waged a multiyear campaign against Wall Street Journal parent company News Corp despite the Murdoch family having priority shareholdings.

Parvus was co-founded in 2004 by former Merrill Lynch fund manager Edoardo Mercadante. It made a name for itself by successfully opposing UK bookmaker William Hill’s proposed merger with rival gambling group Amaya and UK security group G4S’s £5.2bn takeover bid for Danish facilities management company ISS.

Alongside Flutter and Ryanair, it has also previously built positions in Italian bank UniCredit, French hotel group Accor and Ipsen, another Danish drugmaker.

Early support from investor Accolade Partners helped swiftly drive the private-equity firm’s debut software investment fund to its upper limit

Sundance Growth, a software-focused investment firm founded by former Accel-KKR dealmaker Christian Stewart, has hit a $125 million upper limit for its debut fund in one of the more difficult private-equity fundraising markets in recent memory.

“We lucked out in having a strategy and a background that appeals to a lot of [investors],” said Stewart, who founded Sundance after around eight years on the growth-investment team at software-focused firm Accel-KKR.

Sundance Growth Fund I reached a final closing in well under six months and benefited earlier this year from support by Accolade Partners, a fund-of-funds manager that also was an early investor in Accel-KKR’s funds. Accolade, which invests in first- and second-time funds of venture and growth firms, was won over by the combination of Stewart’s hustle and the track record he built at Accel-KKR, according to Atul Rustgi, a managing partner at Accolade.

“They are arguably one of the best—if not the best—firms in software private equity,” Rustgi said of Menlo Park, Calif.-based Accel-KKR. “They‘re a great training ground.”

Washington-based Accolade’s commitment as well as work by placement agent Pacenote Capital helped Sundance quickly garner additional investor capital, pushing its fund past a $100 million target, according to Stewart. In addition to Accolade, the debut fund has attracted capital from eight other institutional investors, including endowments, foundations and a firm that operates as an outsourced chief investment office, he added.

Stewart has recruited Sean Cooley, formerly with Kayne Anderson Capital Advisors, as a vice president at Sundance and Trey Jackson, a recent graduate of Brigham Young University, as an analyst. He said the firm also plans to add an experienced associate as well as an operating executive.

Sundance targets investments in growing business-to-business software companies with $3 million to $10 million in annual recurring revenue.

“Those companies really don’t have a home today,” Stewart said. “They’re not venture. They’re not traditional growth, because they’re not growing fast enough, and they’re not private equity, because private-equity firms don’t want to take on the [cash] burn.”

Sundance typically makes minority investments, but over time can expand its stakes in certain companies it backs to majority positions, Stewart said. It aims to help the companies it backs grow to a point where they become attractive takeover targets for strategic buyers or other private-equity firms at higher valuations than they would currently attract, he added.

The firm plans to invest in about six companies and is far along in the process with two potential deals, Stewart said.

The strategy resonated with investors beyond Accolade, said Sam Cannon, managing partner at Pacenote Capital, which worked with Sundance to find investors for the fund.

“Christian’s discipline around fund size and desire for a concentrated portfolio is a breath of fresh air for [investors] who too often see [firms] maximizing fund size and thus being forced to do either larger deals or more deals, or worse yet, both,” Cannon said.

Sundance Growth raised its debut fund at a particularly challenging moment for first-time fund managers, as more cash-strapped investors concentrate their commitments with established firms.

Last year, U.S. firms closed at least 46 first-time private-equity, growth investment and turnaround funds, raising $9.2 billion—but that was down from 121 such funds that closed on $21.5 billion in 2023, WSJ Pro Private Equity reported earlier this year, citing data from research-provider PitchBook Data.

However, Rustgi said investors like Accolade favor first and second funds as they often generate strong returns.

“Our entry point is usually a fund one or fund two,” he said. “They’re hustling harder and they’ve got a chip on their shoulder to make sure every deal is perfect.”

Warner Bros Discovery to split its TV and streaming businesses

US media group to separate streaming and studios unit from declining television network as viewing habits change

Warner Bros Discovery will split its business into two publicly traded companies, with one focused on its streaming and studios business and the other on its television network businesses, including CNN and Discovery.

The US media company said the move would unlock value for shareholders as well as create opportunities for both businesses, breaking up a group created just three years ago following the merger of Warner Media and Discovery.

Warner Bros Discovery last year revealed plans to restructure its business into two units, a move first reported as among the options to boost its flagging share price by the Financial Times in July last year. The company intends to complete the split by the middle of next year.

The move comes on the heels of a similar move by rival Comcast, which last year announced plans to spin off its television networks, including CNBC and MSNBC, into a separate company.

US media groups are seeking to split their faster-growing streaming businesses from their once dominant legacy television networks, which are facing the prospect of long-term decline as viewers turn away from traditional television.

Warner Bros Discovery shares were more than 10 per cent higher in pre-market trading.

David Zaslav, chief executive of Warner Bros Discovery, will head the streaming and studios arm, while chief financial officer Gunnar Wiedenfels will serve as president and chief executive of global networks. Both will continue in their present roles until the separation.

Zaslav said on Monday that the split would result in a “sharper focus” and enhanced “strategic flexibility”, which would leave each company better placed to compete in “today’s evolving media landscape”.

Warner Bros Discovery chair Samuel A Di Piazza Jr said the move would “enhance shareholder value”.

The streaming and studios arm will consist of Warner Bros Television, Warner Bros Motion Picture Group, DC Studios, HBO and HBO Max, as well as the group’s film and television libraries. 

Warner Bros Games and studio production facilities in Burbank, California, and Leavesden, UK, will also be included in this business. The company said that the focus would be on continuing to grow its streaming service, HBO Max, and invest in HBO’s programmes.

Global networks will include entertainment, sports and news television brands around the world, including CNN, TNT Sports in the US and Discovery.

Warner Bros Discovery also said it would restructure its debt, which has been a drag on its share price, using a $17.5bn bridge facility provided by JPMorgan Chase. This would be refinanced ahead of the planned separation, the company added.

The networks company will own 20 per cent of the streaming business after the split, a stake it planned to “monetize” to help pay down debt.

Rating agency S&P said in a note last month that a separation would “likely pressure” the company’s ratings because it would weaken the individual businesses, particularly the networks arm, due to “ongoing secular pressure in the linear television ecosystem”.