The European Commission has issued a Statement of Objections outlining its preliminary competition concerns over the planned graphic paper joint venture between UPM and Sappi.
According to the Commission, the proposed transaction could reduce competition in the European markets for coated mechanical paper and wood-free coated paper. These grades are widely used for magazines, books and promotional materials.
The Commission’s preliminary assessment indicates that the joint venture could gain sufficient market power to increase prices or reduce product quality. The regulator also remains unconvinced that the cost savings, environmental improvements and supply-resilience benefits presented by the companies would offset the potential harm to competition.
A Statement of Objections is a formal step in an in-depth merger investigation and does not prejudge the final outcome. UPM and Sappi can submit a response, examine the Commission’s case file and request an oral hearing.
UPM said it is reviewing the document with Sappi and will respond in due course. The company remains confident that it can address the Commission’s preliminary concerns.
UPM also maintained that the venture is needed to secure reliable supplies for European graphic paper customers and strengthen an industry facing declining demand, structural overcapacity and high operating costs.
The Statement of Objections marks the latest development in a review whose timetable was suspended on May 26 while regulators awaited requested information. The Commission now has until November 11 to issue a final decision.
The proposed 50-50 venture, valued at €1.42 billion, would combine the entire UPM Communication Papers business with Sappi’s European graphic paper operations. The two businesses will continue operating independently until the transaction receives the required regulatory approvals and closes.
Earlier coverage: EU Suspends Review Timeline for UPM-Sappi JV
