UPM and Sappi have taken the next step towards combining their graphic paper businesses. After announcing such plans and signing a letter of intent on 4 December last year, the two parties now signed a definitive agreement to form a graphic paper joint venture.
The companies plan to merge UPM's Communication Papers business with Sappi's graphic paper business in Europe. This includes eight UPM paper mills in Finland, Germany, the UK and the US as well as Sappi's four graphic paper mills in Finland, Germany, Austria and the Netherlands.
The two parties will each hold a 50 per cent stake in the joint venture, which will operate as an independent company. The merger is aimed at strengthening the resilience of the European graphic paper industry, which has been facing declining demand for years as well as persistently high cost pressure.
The transaction remains subject to shareholder approval as well as merger control approvals in the EU and other jurisdictions, including the US and China. As previously announced, the European Commission is currently conducting an in-depth investigation of the proposed transaction and has until 26 October 2026 to decide whether to approve the joint venture. Final approvals are expected by the end of 2026.
The financing is secured
UPM reports that the parties have secured €600m in external financing for the transaction as well as a €100m revolving credit facility. Part of the purchase price will also be financed through shareholder loans.
The joint venture is expected to create annual synergies estimated at about €100m. UPM and Sappi put the combined enterprise value of their merged businesses and assets at €1.42bn, excluding the value of synergy benefits. UPM‘s Communication Papers business is valued at €1.1bn, while Sappi's European business is valued at €320m.
As consideration for the assets contributed to the planned joint venture, UPM will receive cash proceeds of €475m, shareholder loan receivables worth €98m in total and a 50 per cent stake in the joint venture valued at €167m, the company says. The transferred business will also include net pension and other liabilities of €411m based on the year-end 2025 balance sheet. Sappi will receive cash proceeds of €90m, a shareholder loan receivable worth €10m and the remaining 50 per of the joint venture. The companies emphasise that the cash proceeds and financial impact of the transaction are estimates and subject to customary purchase price adjustments.
The agreement includes options for both shareholders to reduce or exit their stakes in the future. Two years after closing, UPM may sell part of its preferential shareholder loan to Sappi, while either party may initiate a divestment of their shareholding in the joint venture after three years
