A New Phase of Consolidation in Graphic Papers
UPM and Sappi have signed a non-binding letter of intent to create a 50/50 joint venture that would unite nearly all of their graphic paper operations. The move marks one of the most significant structural shifts in Europe’s printing and writing paper sector in more than a decade, reflecting continued demand decline, persistent overcapacity and high energy costs across the region.
The proposed entity would operate as an independent company and manage its own production strategy, assets and financial decisions within shareholder parameters.
“The proposed Joint Venture represents a decisive response to the structural changes in the European graphic paper industry,” said Massimo Reynaudo, President and CEO of UPM. “It would offer a path to strengthen the resilience of the industry and provide long-term commitment and supply security to graphic paper customers.”
Reynaudo added that the plan gives UPM a clearer strategic focus while positioning its Communication Papers unit for a more sustainable future under a shared structure.
Scope of the Planned Combination
The joint venture would encompass:
- UPM Communication Papers, including eight mills in Finland (Kymi, Rauma, Jämsänkoski PL6), Germany (Nordland PL1 & PL4, Augsburg, Schongau), the UK (Caledonian) and the United States (Blandin).
- Sappi’s European graphic paper operations, covering the mills in Kirkniemi (Finland), Ehingen (Germany), Gratkorn (Austria) and Maastricht (Netherlands).
Altogether, the portfolio represents a broad suite of coated and uncoated printing papers serving customers in Europe and globally.
The companies estimate €100 million in annual synergies through machine optimization, logistics improvements, sourcing efficiencies and a streamlined product mix.
Aiming for Efficiency, Stability and Lower Emissions
Beyond consolidation, the partners argue the transaction would create a more flexible and energy-efficient production platform, better aligned with shrinking demand.
The joint venture would adjust production volumes across the most efficient machines, enabling higher utilization rates and operational stability. Both companies also see climate benefits in a more optimized network. UPM notes that its Communication Papers unit already targets up to a 70% reduction in product emissions by 2030, and expects the joint venture structure to support further improvements through shared decarbonization measures.
Financial Structure and Valuation
According to the letter of intent:
- The combined enterprise value of the contributed businesses totals €1.42 billion, excluding synergies.
- UPM Communication Papers is valued at €1.1 billion. UPM would receive €613 million in cash and a 50% stake in the joint venture.
- Sappi’s European graphic paper business is valued at €320 million, with Sappi receiving €139 million in cash and a 50% stake.
To fund these upfront payments, the joint venture would secure its own external financing. Future capital needs would be met without recourse to either parent company.
UPM expects the transaction to improve its profitability margins, strengthen its balance sheet and reduce exposure to declining graphic paper markets. Post-transaction, UPM’s remaining business portfolio would be more focused on growth areas such as renewable materials and advanced bioproducts.
Timeline and Regulatory Review
The companies aim to finalize definitive agreements in the first half of 2026, subject to several steps, including external financing arrangements and Sappi shareholder approval.
Because the transaction would reshape Europe’s graphic paper landscape, it will undergo a full review by the European Commission, as well as regulators in the US, UK and China. If approvals proceed as expected, the joint venture could close by the end of 2026.
Until then, UPM Communication Papers and Sappi’s European graphic paper operations will continue to run as separate, independent businesses.
Source: UPM
