TheChek News Flow

The combined VML will employ more than 30,000 people in 64 markets

Advertising holding company giant WPP is combining two of its major creative agencies, VMLY&R and Wunderman Thompson, as it seeks to further simplify its business for marketer clients.

London-based WPP, which owns agencies including Ogilvy as well as media-buying giant GroupM, said the combined agency will be called VML and employ more than 30,000 people in 64 markets.

VMLY&R and Wunderman Thompson were the product of mergers five years ago when WPP sought to integrate some of its iconic creative agencies with more digitally focused shops. In 2018, WPP matched creative shop Young & Rubicam with digital ad firm VML to form VMLY&R. Also that year, WPP combined J. Walter Thompson, one of the oldest ad agencies in the world, with digital agency Wunderman to create Wunderman Thompson.

VML will be led by Jon Cook as global chief executive and Mel Edwards as global president. Cook previously led VMLY&R and Edwards led Wunderman Thompson. Debbi Vandeven, who had been global chief creative officer at VMLY&R, will take on the same role at VML.

The merger is another important step in the simplification of WPP and its offerings to clients, Chief Executive Mark Read said.

Advertising agencies’ remit has ballooned far beyond work such as making television commercials and now includes offerings such as data consulting, e-commerce and other technology-related services.

WPP, for instance, has said an increasing amount of its creative agencies’ efforts fall outside traditional agency work to include technology, e-commerce and data consulting. The company hopes to make it easier for marketers to access such different services by putting them under the same roof.

WPP needed to evolve more as the marketing landscape has continued to shift, especially as the industry braces for what artificial intelligence will bring, Read said.

“Success with AI is going to require us integrating creative and media and production, and it’s going to be much easier for us to do that inside WPP with fewer, stronger companies,” he said.

Asked whether the merger would result in job cuts, Read said the move is designed to help VML invest more in areas such as creativity, strategy and technology. “Some of that will come likely at the expense of non-client facing capability, but it’s really about investing the resources we have on what matters to clients,” he said.

Cook said VML hopes to focus on brand experience, customer experience and commerce for clients. “I think the feeling from a lot of our clients is if you can make [the agency offering] simpler, you can also make it more powerful and create more relevance,” he said.

The choice of name was meant to showcase that simplicity, Edwards said. “We could have gone with an amalgamation of VMLY&R and Wunderman Thompson, but oh my goodness, can you imagine the name?” she said.

WPP, which plans to report quarterly earnings next week, in August reduced its growth forecast for the year after it saw lower revenue in the U.S. from technology clients and delays in spending on technology projects.

Global warning system essential to beat future pandemics, says Cepi chief

Richard Hatchett’s call for rapid detection comes as countries discuss WHO treaty on how to avoid another health crisis

A “global early warning system” for dangerous viruses is essential to head off future pandemics and speed up vaccine development, says the head of an organisation charged with preventing such health crises.

Greater surveillance and co-operation are needed to flag what health experts call “disease X”, an infectious disease yet to emerge that has the potential to cause a pandemic, said Richard Hatchett, chief executive officer of the Coalition for Epidemic Preparedness Innovations (Cepi).

Rapid detection is crucial to Cepi’s central goal to speed the world’s response to emerging viruses and cut development times for new vaccines to just 100 days.

“We need a global early warning system for disease X that is built on strong, active and continuous surveillance capabilities,” Hatchett told a Nikkei-Financial Times conference in Tokyo on communicable diseases. “This enhanced surveillance must be as global and as comprehensive and as interconnected as possible.”

Hatchett’s call for an early warning system came shortly after a draft of the pandemic preparedness treaty, being negotiated at the World Health Organization, was sent to member states.

The leaked draft, seen by the Financial Times, includes measures to help scale up production during a global health crisis. But the pharmaceutical industry is resisting any measures that would force it to waive its patents.

Thomas Cueni, director-general of the International Federation of Pharmaceutical Manufacturers and Associations, said the private sector was able to develop new vaccines and treatments to tackle Covid-19 because of decades of investment in research and development. 

“It would be better to have no pandemic treaty than a bad pandemic treaty, which the draft circulated to member states clearly represents,” he said. “If adopted, the draft treaty would undermine both and leave us weaker ahead of the next pandemic than we were in December 2019, and we urge governments to make significant revisions to the current text.”

Some non-governmental organisations called for the accord to have more teeth. Dr Mohga Kamal-Yanni, policy co-lead for the People’s Vaccine Alliance, said the current wording “contains too few obligations to ensure that government’s take these essential measures”.

The WHO aims to enact a pandemic treaty by May 2024.

Closer worldwide monitoring links with an initiative to prepare an international “vaccine library”, Hatchett said. This would contain the pharmacological building blocks for inoculations likely to be needed to counter any disease that might pose dangers on a pandemic scale.

“The core idea of a global vaccine library is to solve the critical challenges of vaccine design for a given genus or family of viruses in advance,” Hatchett said. “And to show that safe and effective vaccines employing such solutions can be delivered using the rapid response platforms available to us.”

Building such a library was a “huge task”, he added. Companies involved in the scheme would need to co-ordinate investments and share data when outbreaks of new diseases occurred.

Cepi, a partnership set up in 2017 between governments, charities and industry, has taken on a critical role since the Covid-19 pandemic. It has devised a $3.5bn five-year programme to produce vaccines that can pass initial clinical trials within 100 days of a pathogen being genetically sequenced and identified as a possible pandemic threat. That timeframe is much shorter than the 326 days it took for BioNTech/Pfizer’s jab to receive UK authorisation in December 2020.

Cepi’s partners include BioNTech, which developed the messenger RNA-based Covid vaccine, and the University of Oxford, developer of the low-cost jab manufactured by AstraZeneca.

Cepi is investing to expand networks of vaccine manufacturers in or near areas at high risk of disease outbreaks. It is also attempting to set up clinical trial systems in lower and middle income countries to enable rapid generation of efficacy and safety data for novel vaccines.

Hiroaki Ueno, president of Japan Pharmaceutical Manufacturers Association, told the Tokyo conference: “We have to prepare for the next pandemic. Agility in the face of emergency is important.”

Biden administration’s move aims to limit country’s access to advanced processors

The Biden administration is tightening export controls for cutting-edge artificial intelligence chips, in an update to existing rules that will severely limit the ability of Nvidia and other manufacturers to sell high-performance semiconductors to China.

The US commerce department on Tuesday extended the sweeping export controls that were first introduced in October 2022, in an effort to reflect technological advances and also to make it harder for companies to find ways to work around the restrictions.

Commerce secretary Gina Raimondo said the goal of the update was to curb China’s access to advanced chips that “could fuel breakthroughs in artificial intelligence and sophisticated computers” that are critical for the Chinese military.

It comes weeks before a possible summit between Joe Biden and Xi Jinping if the Chinese leader attends the Asia-Pacific Economic Cooperation forum in San Francisco.

China has slammed the US over its export controls. During recent visits to Beijing, however, US officials have stressed that while the Biden administration wants more engagement, it would not avoid taking national security actions when warranted.

Graphics processing units produced by Nvidia, AMD and Intel have become an indispensable component for training large AI models for tech companies, governments and start-ups, sparking a rush for the latest chips.

After the introduction of last year’s rules, Nvidia designed new versions of its top-tier H100 and A100 GPUs specifically for Chinese customers, bringing them below the performance threshold set by the US.

Chinese tech companies have been rushing to buy these modified H800 and A800 GPUs, which are critical for generative AI, amid concern that the US would tighten restrictions.

One US official said the new rule would bar Nvidia from selling A800 and H800 GPUs chips in China. The updated rules will also impact Gaudi2, an Intel AI chip. A second official said the administration had taken into account how groups were “trying to work around our parameters” in drafting the update.

Nvidia chief executive Jensen Huang told the Financial Times earlier this year that the 2022 controls had left the Silicon Valley company with its “hands tied behind our back” by barring sales of its most advanced chips to China. He has said further restrictions could seriously harm US chipmakers by eating into their ability to finance investment.

Nvidia, which depends on China for as much as 25 per cent of its data centre chip revenues, did not comment on the updated rules.

“The most immediate effect will be cutting China off from advanced AI chips, including the modified versions of chips that Nvidia specifically designed to comply with last year’s controls,” said Gregory Allen, an AI expert at the CSIS think-tank. “Now [Chinese companies] are looking at years where the AI chips that China can access are significantly inferior to what is available in the west.”

Under the 2022 rule, the US barred exports of chips that exceeded two thresholds: one for power and the other for the speed at which chips talk to each other. The commerce department is replacing the latter with a “performance density” measure that is explicitly designed to stop companies from finding workaround solutions.

The revamped export controls will prohibit the sale to Chinese groups of data centre chips that are capable of operating at speeds of 300 teraflops — meaning they can calculate 300tn operations per second — and above.

Sales of chips with speeds of 150 to 300 teraflops will be barred if they have a performance density of 370 gigaflops (bn calculations) per square millimetre or more. Chips that operate at those speeds but with lower performance density fall into a “grey zone”, meaning firms must notify the government about sales to China.

Raimondo said the rules would exempt chips for consumer products, such as for smartphones and gaming. But the officials said exporters would have to notify the government when they exported chips with speeds of more than 300 teraflops.

The updated rules also expand the list of chipmaking tools that cannot be sold to China. The second official said the US would also add two Chinese groups to the “entity list”, making it extremely hard for them to get US technology. He said the two groups were involved in the design of chips that undermined US national security.

Belgian group cuts capital expenditure forecast after $715mn pledged in government support for factory in Ontario

Shares in European battery materials specialist Umicore rose 14 per cent on Tuesday after Canada granted huge subsidies for its planned plant in Ontario.

The stock price rise for the Belgian group, which added almost €1bn to its market capitalisation, highlights how a subsidy race triggered by the US Inflation Reduction Act is benefiting certain parts of the battery supply chain.

The Canadian and Ontario governments pledged late on Monday to provide up to C$975mn ($715mn) of support for a cathode materials factory that will cost up to C$2.7bn and will eventually supply enough material for 800,000 electric vehicles produced by manufacturers including BMW.

As a result of what Umicore called “higher than expected” subsidies, the company cut its forecast for capital expenditure between 2022 and 2026 to €3.8bn from more than €5bn previously.

After the news on Tuesday, Umicore shares staged their second-biggest one-day rally for three decades.

The business, which has historically made the bulk of its revenues from making catalytic converters for combustion engines, is one of a handful of western suppliers that produces the highly specialised materials used in the most expensive part of an EV battery, the cathode.

Chief executive Mathias Miedreich said in a statement that the “investment in Canada represents the final step in creating a truly global production presence”.

Umicore has a joint venture with Volkswagen that has also contributed to lowering its capital spending forecasts. The unit, called Ionway, announced last week that its first plant for cathode material production in Europe would be set up in Nysa, Poland. 

Umicore also announced a new target for a 25 per cent margin for its earnings before interest, taxes, depreciation and amortisation from 2026, up from above 20 per cent to 2030.

On Monday, it signed an agreement to supply the US battery plants of Chinese-owned battery group AESC with material produced from its Ontario plant.

Meanwhile, Ford has paused construction on a $3.5bn electric vehicle battery plant in Michigan using technology from another Chinese company CATL, amid Republican criticism and an autoworkers’ strike

Canada has been a big beneficiary of US president Joe Biden’s $369bn Inflation Reduction Act because raw materials sourced from Canada count towards tax credits, while its clean power is a draw for materials production, which is energy intensive.

But the US has also offered subsidies for the battery supply chain, including $2.8bn from the Department of Energy, pushing Canada to respond.

Canada’s mining minister Jonathan Wilkinson told the Financial Times last month that the government had increased subsidies to persuade companies from moving investments to the US and that the IRA “at times went beyond from a financial perspective where it needed to”.

Russian businessman asks High Court to be allowed to pay staff salaries, including for a driver

Mikhail Fridman, the sanctions-hit Russian businessman, has asked London’s High Court to allow him to make payments, including a £30,000 monthly fee for the running costs of his London mansion plus payments to cover a driver.

Fridman, who is now in Moscow, is challenging the Treasury — which oversees the UK sanctions regime — to grant a licence authorising the payment of a £30,000 monthly management fee to a company that maintains Athlone House, the Victorian mansion in Highgate, north London, which he bought for £65mn in 2016.  

He also wants another £1,850 monthly payment to be made for utilities including TV equipment, lighting, heating and security — including for his art collection at Athlone House, the High Court heard on Tuesday.

Fridman is also asking the High Court to order the Office of Financial Sanctions Implementation (OFSI), which is part of the Treasury, to grant a licence to pay wages and salaries dating back to December 2022 for all non-security staff, including his driver.

The Treasury is opposing any changes to the existing licences. 

The High Court heard on Tuesday that OFSI’s refusal to allow licence payments for a driver was “on the basis that the defendant is able to travel by public transport (notwithstanding the defendant had previously accepted that the claimant had particular security needs)”.

Fridman, who was hit with sanctions by the UK, EU and US, returned to Moscow this month for the first time since Russia’s full-scale invasion of Ukraine in February last year. The Ukraine-born businessman is among the few oligarchs to have offered even guarded criticism of President Vladimir Putin’s invasion. 

Rachel Barnes KC, representing Fridman, told the High Court that the UK government was now saying the businessman was “not an oligarch” or “associated with President Putin” and his sanctions designation was based on his former significant stake in Russia’s Alfa-Bank.

She told the court that “for many years he has made his home in London and lives here with his family”, adding that he hoped to return.

The court heard that Athlone House was “a heritage property of historical value”.

“The licence application in relation to that property is not about the maintenance of the oligarch lifestyle but the maintenance upkeep of that heritage asset,” Barnes told the court.

Malcolm Birdling, barrister for the Treasury, said in written arguments that the UK government opposed the changes to sanctions and contended the applications for the additional payments were “decided lawfully” and “rightly rejected”.

OFSI rejected a licence for payments to “numerous staff”, including an estate director/manager, six housekeeping assistants, two handymen and one individual providing ad hoc services that would “enable Mr Fridman to continue enjoying the lifestyle he had prior to being designated”, Birdling claimed.

He said in written arguments that Fridman already had the benefit of a licence for several payments relating to security, including an ongoing monthly payment of £1,974 for CCTV maintenance. 

The hearing continues.

Milan acts as security fears across Europe rise after gunman in Brussels claims to be member of jihadist group

Italian authorities have arrested two men suspected of carrying out online recruitment activities on behalf of the Islamist terror group Isis on Tuesday, in yet another sign of the heightened security alert across Europe following the outbreak of the Israel-Hamas conflict.

The counter-terrorism operation, co-ordinated by the Milan prosecutor’s office, took place in the early hours of the morning. The two men whose names were not released by authorities, were an Egyptian citizen aged 49 and a naturalised Italian of Egyptian origin, 44, who had been active on social media to try to find recruits for the jihadist group.

Giuseppe Petronzi, head of police in Milan, said the authorities had decided to detain the two men now given the “particularly sensitive international context,” with the risks that Islamist extremists could be inspired to emulate terrorist attacks carried out elsewhere.

The arrest comes just a day after a gunman of Tunisian origin who claimed to be an Isis member shot and killed two Swedish football fans in Brussels in what Belgium’s prime minister Alexander de Croo has described as a “brutal terrorist attack”.

The two suspects in Italy were charged with being Isis members and are suspected of financing propaganda and support initiatives for the jihadist group, the prosecutor’s office said.

Milan prosecutor Marcello Viola said the men had been under investigation since August 2021. One had taken an oath of allegiance to Isis one year ago, and posted it on Facebook. Both were part of jihadi WhatsApp groups linked to Isis. They knew each other and had been in Italy since 2008 and 2001, respectively.

Officials said the two were involved in “the glorification of terrorist actions” and used social media to advise others on how to handle weapons. They were sending torrents of messages attempting to recruit susceptible young people to take up the fight for Isis.

“There were continuous exchanges of messages . . . their goal was one: to bring anyone who came in contact with them closer to the world of [Isis] and to participate in any kind of initiative,” said Daniele Calenda, director of the Italian police’s special investigations unit.

Authorities did not say that the two were planning any imminent attack in Italy, but said that their threats to Italian government institutions had come from their social media accounts.

Like other European countries, Italy has been on heightened alert and stepped up security in sensitive sites across the country since Hamas attacked Israel earlier this month. Foreign minister Antonio Tajani said that there were “no imminent threats”.

A deal would unite the Radisson and Ramada brands

Choice Hotels International has launched a nearly $10bn hostile bid for rival Wyndham Hotels and Resorts, after six months of takeover talks to create one of the biggest US budget hotel operators collapsed. 

The decision to go hostile came after Wyndham decided to walk away from late-stage deal talks in recent weeks after rejecting two offers from its rival, Choice said on Tuesday. 

“A few weeks ago, Choice and Wyndham were in a negotiable range on price and consideration, and both parties have a shared recognition of the value opportunity this potential transaction represents. We were therefore surprised and disappointed that Wyndham decided to disengage,” said Choice chief executive Patrick Pacious.

“While we would have preferred to continue discussions with Wyndham in private, following their unwillingness to proceed, we feel there is too much value for both companies’ franchisees, shareholders, associates and guests to not continue pursuing this transaction,” said Pacious.

Choice has offered Wyndham shareholders $90 a share, which includes $49.50 in cash and the remainder in stock, valuing the equity at $7.8bn. Choice would also take on Wyndham’s $2bn debt. The offer is 30 per cent above Wyndham’s share price on Monday after markets closed. 

Maryland-based Choice Hotels has brands including Radisson, the Econo Lodge and Sleep Inn and has a market capitalisation of $6.1bn. New Jersey-based Wyndham is home to the La Quinta and Ramada brands and has a market capitalisation of about $5.7bn.

The potential tie-up would create one of the biggest budget hotel owners in the US, with significant operations overseas. Choice has 7,827 hotels in its portfolio worldwide, about four-fifths of which are in the US, while Wyndham has around 9,100 hotels, with 845,000 rooms. Both companies run a franchised model. 

Choice’s latest offer is the third it has sent to Wyndham since they first held talks six months ago. In April, it proposed buying Wyndham for $80 a share, mainly in stock, and in September it increased its bid to $85 a share, while also increasing the cash portion of the offer. 

Wyndham rejected both, although Choice claimed that the rival acknowledged the benefits of a combination that they believe would create annual synergies worth about $150mn.

Wyndham raised questions about the value of Choice’s stock and timing for regulatory approval, Choice said in its statement. The company added that the cash portion of its offer would be funded with a combination of cash on hand and issuing debt.

Moelis & Company and Wells Fargo are serving as financial advisers to Choice, alongside legal adviser Willkie Farr & Gallagher.

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