UPM-Kymmene Corporation (“UPM”) and Sappi Limited (“Sappi”) have signed a non-binding letter of intent to form a graphic paper joint venture (“the Joint Venture”) set to be a major consolidation in the paper segment.
The Joint Venture would include the entire UPM Communication Papers business and Sappi’s graphic paper business in Europe. The Joint Venture would be owned 50/50 by UPM and Sappi. It would operate as an independent company, managing its own operations, resources, and decisions within agreed shareholder boundaries.
According to the statement after the signing agreement, the transaction would create a more efficient, adaptable, and sustainable graphic paper business. It would create a structurally competitive cost base and supply security for the European and global customers. By strategic reallocation of production volumes to the most efficient paper machines, the Joint Venture would achieve more sustainable capacity utilization and stronger operational performance, while continuing to serve customers with a broad portfolio of graphic paper products.
Overall, the Joint Venture would rationalize supply in an industry burdened by declining demand, structural overcapacity, and high energy costs. It would contribute to a more balanced and resilient European market and make the industry better positioned to withstand market challenges and increasing imports to Europe. Not only that, the Joint Venture is expected to create annual synergies estimated at €100 million through asset optimization, product portfolio rationalization, logistics optimization, sourcing efficiency improvements, and operational efficiencies. The planned perimeter of the Joint Venture would include:
– The entire UPM Communication Papers business, including eight UPM Communication Papers’ paper mills at Kymi, Rauma (including UPM RaumaCell) and Jämsänkoski (paper line 6) in Finland; Nordland (paper lines 1 and 4), Augsburg, Schongau in Germany; UPM Caledonian paper mill in the UK and Blandin paper mill in the USA; and
– Sappi’s European graphic paper business, including the following four graphic paper mills: Kirkniemi in Finland, Ehingen in Germany, Gratkorn in Austria and Maastricht in the Netherlands.
