Sappi Limited (“Sappi”) and UPM-Kymmene Corporation (“UPM”) have today announced the signing of a non-binding letter of intent to form a non-listed, independent 50/50 Joint Venture for graphic paper. This Joint Venture will bring together Sappi’s European Graphic Paper business with UPM’s Communication Papers business in Europe, the UK and the US. The transaction will be subject to the fulfilment of a number of regulatory and other conditions, including shareholder approval. The parties intend signing definitive agreements during the first half of calendar year 2026 and expect to close the proposed transaction by the end of calendar year 2026, once all conditions precedent are fulfilled.
Commenting on their decision to create the Joint Venture, Sappi Limited CEO Steve Binnie and UPM President and CEO Massimo Reynaudo said: “The proposed joint venture represents a decisive response to the structural changes in the European graphic paper industry, offering a path to strengthen its resilience and provide long-term commitment and supply security to customers.”
Commenting on the benefits to Sappi, Steve Binnie said: “Sappi is very excited by the potential that this joint venture, if approved, will bring. We have been searching for a solution to secure a long-term profitable future for our European business. This innovative partnership with UPM will deliver a focused business bringing the best assets and people together to create a strong future which can ensure sustained support for our customers and can also ensure that the European manufacturing base is protected.
He continued: “The proposed joint venture provides a unique opportunity to unlock value for our shareholders. The transaction delivers on Sappi’s Thrive strategy to reduce our direct exposure to the graphic paper segment and enables us to reposition our portfolio towards higher-growth, higher value segments. Sappi’s direct sales volume exposure to the graphic paper segment will decrease to below 20% after the transaction is completed and our 50% shareholding in the joint venture is anticipated to generate more value than the standalone Sappi graphic paper business.
He concluded: “Ultimately the transaction will enable Sappi to reduce debt in the medium term and in the future the cash dividends from the joint venture will further lower debt. ”
The launch of this proposed joint venture takes place against a backdrop of sustained structural decline in demand within the graphic paper market alongside overcapacity and low utilisation rates of assets. This significant erosion has been caused by a number of factors including a structural shift toward digital media, declining print advertising revenues, falling newspaper and magazine circulations, and the rapid adoption of electronic media and workflows.
This deterioration has been further intensified by rising costs (in particular energy) in Europe. Recent trade tensions and tariffs have further disrupted trade flows resulting in increased Asian exports to the European Union (the EU).
Marco Eikelenboom, CEO of Sappi Europe commented: “To remain competitive and sustainable in the long term, consolidation is needed. Consolidation will contribute to a more robust and resilient European graphic paper industry, safeguarding security of domestic supply for the printing sector.”
The key benefits of the consolidation of Sappi and UPM’s graphic paper assets are:
- By strategically reallocating production volumes to the most efficient paper machines, the Joint Venture will achieve more sustainable capacity utilisation and stronger operational performance, while continuing to serve customers with a broad portfolio of European graphic paper products.
- The operational synergies created through the Joint Venture (which are anticipated to be at least €100 million per annum once the Transaction is implemented) provide a pathway to realise greater value from the combined asset base, delivering enhanced profitability and stronger cash-flow generation compared to what the independent operations could achieve on their own, to the benefit of all stakeholders including shareholders.
- By optimising capacity utilisation, enhancing operational efficiencies and continuing to invest in decarbonisation, the Joint Venture can reduce its overall climate impact, helping to advance the EU’s Clean Industrial Deal objectives.
The proposed transaction will be structured to enable the parties to respectively contribute the assets detailed below to the newly formed Joint Venture with Sappi and UPM as founding shareholders and each holding 50% of the issued shares.
Sappi and UPM will sell their respective businesses and assets mentioned below to the newly formed Joint Venture with a combined enterprise value of €1,420 million excluding the value of the expected synergy benefits. At closing the Joint Venture will raise debt to fund the purchase prices payable to Sappi and UPM respectively. The Joint Venture’s dividend policy will be to distribute all excess cash to its shareholders.
The Sappi business is valued at €320 million which, based on an FY2025 EBITDA of €64 million represents a 5x multiple. Sappi will transfer pension and other liabilities of €53 million and net assets valued at €267 million to the Joint Venture. In return Sappi will receive cash of €139 million and 50% shareholding in the Joint Venture.
The UPM business is valued at €1,100 million, which represents a 4.6x multiple of the last reported 12 months to September 2025 EBITDA. UPM will transfer pension and other liabilities of €360 million and net assets of €740 million to the Joint Venture. In return UPM will receive cash of €613 million and 50% shareholding in the Joint Venture.
Sappi will contribute the following assets: Gratkorn Mill (Austria); Ehingen Mill (Germany), Maastricht Mill (The Netherlands), and Kirkniemi Mill (Finland); as well as Sappi Europe’s wood supply Joint Ventures.
UPM will contribute their Communication Papers business assets which are located at the following UPM mills: Augsburg (Germany), Schongau (Germany), Nordland paper lines 1 and 4 (Germany), Rauma including UPM RaumaCell (Finland), Kymi (Finland), Jämsänkoski paper line 6 (Finland), Caledonian (United Kingdom), and Blandin (United States of America).
During the transition phase, both Sappi and UPM will provide relevant operational and administrative support to the Joint Venture to ensure it can operate optimally.
Further information (Stock Exchange announcement; Fact Sheet; Investor Presentation) can be found atwww.sappi.com/investors/next-event